tag:blogger.com,1999:blog-46728736460092600202018-05-20T08:57:08.141+01:00 The Wealth Lawyer UK News you can use...Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comBlogger106125tag:blogger.com,1999:blog-4672873646009260020.post-58790226164340120892017-10-16T10:08:00.003+01:002017-10-16T10:09:51.654+01:00Come on over to our new place!<br /><div style="margin: 0cm 0cm 0pt;"><span style="color: blue; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="color: black;">Wealth Lawyer UK has a brand new website and a fresh new look.&nbsp; Click </span><a href="https://www.wealthlawyeruk.com/"><span style="color: blue;">here</span></a><span style="color: black;"> for a link to the new site, now hosted on Fladgate’s website.&nbsp; </span></span></div><span style="color: black;"> </span><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="color: black;"><span style="color: black;"><span style="color: blue; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="color: black;">We’ve also made it even easier to get your fortnightly fix on developments in the legal Private Wealth world.&nbsp; Just register your interest on the new website and blogs will be emailed direct to your inbox as they appear – it couldn’t be easier.</span> </span></span></span></span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-17328559463407162962017-10-05T08:21:00.002+01:002017-10-05T08:21:45.294+01:00UK tax legislation update: taxation of non-doms<br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt; line-height: 115%;">Over the past couple of years, the Government has placed non-doms on notice of its intention to change the way in which they and their offshore trusts are taxed for UK tax purposes.<span style="mso-spacerun: yes;">&nbsp; </span>Now finally all previously trailed provisions have been reintroduced into draft legislation, so here is a brief reminder of the main provisions affecting the personal taxation of non-doms, with some practical pointers.<span style="mso-spacerun: yes;">&nbsp; </span>All of the following measures can be found in the Finance (No.2) Bill 2017:</span><a name='more'></a><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt; line-height: 115%;"><span style="background-color: white;"></span></span><br /></div><br /><ul><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; line-height: 13pt; margin-bottom: 6pt; margin-top: 6pt; mso-add-space: auto; mso-list: l1 level1 lfo1; text-align: justify;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">Deemed domicile status</span></i><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">: once a non-dom individual has been resident in the UK for 15 out of the previous 20 UK income tax years, the individual will no longer be able to claim the UK’s favourable remittance basis of taxation from the individual’s 16th year of residency.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>This is confirmed to take effect from 6 April 2017.<span style="mso-spacerun: yes;">&nbsp; </span>When a deemed domiciled individual is UK resident, worldwide income and gains will be subject to UK tax.<span style="mso-spacerun: yes;">&nbsp; </span>Worldwide free estate becomes subject to Inheritance Tax, unless a double tax convention applies. </span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; line-height: 13pt; margin-bottom: 6pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">Formerly domiciled resident individuals</span></i><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">:<span style="mso-spacerun: yes;">&nbsp; </span>individuals born in the UK with a UK domicile of origin but who leave the UK and acquire a foreign domicile of choice will not be eligible for the remittance basis of taxation if the individual becomes UK tax resident on their return to the UK from tax year 2017/2018 or later, but will have a one year grace period before becoming exposed to Inheritance Tax on their worldwide assets.<span style="mso-spacerun: yes;">&nbsp; </span>In addition, none of the tax protections for existing offshore trusts will apply and existing trusts will lose Inheritance Tax excluded property status in the individual’s second year of tax residency.<span style="mso-spacerun: yes;">&nbsp; </span>Rebasing and mixed fund cleansing (see below) are not available.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; line-height: 13pt; margin-bottom: 6pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">Trust protections</span></i><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">: existing offshore trusts of settlors who become deemed UK domiciled will be able to roll up foreign income and gains tax free inside their offshore trusts, provided the trust is not ‘tainted’ by additions after deemed domiciled status commences and while no capital payments or benefits are received.<span style="mso-spacerun: yes;">&nbsp; </span>These trusts also continue to offer IHT protection.<span style="mso-spacerun: yes;">&nbsp; </span>Once tainted, trust protections are lost for good.<span style="mso-spacerun: yes;">&nbsp; </span>There appears to be no <i style="mso-bidi-font-style: normal;">de minimis</i> so be particularly careful here.</span></span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; line-height: 13pt; margin-bottom: 6pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">Rebasing opportunity for newly deemed domiciled individuals</span></i><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;">: provided qualifying conditions are met, non-dom individuals who become deemed domiciled on 6 April 2017 under the new rules will be able to dispose of foreign situated assets pregnant with pre 6 April 2017 gains and only pay UK Capital Gains Tax on gains accruing in the period on or after 6 April 2017 to date of disposal.<span style="mso-spacerun: yes;">&nbsp; </span>Note that this is not a relief from the tax consequences of remitting the sale proceeds to the UK.<span style="mso-spacerun: yes;">&nbsp; </span>Disposals must take place when the qualifying individual is deemed domiciled - this should not be treated as an open ended opportunity, therefore.</span></span></span></div><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; margin-bottom: 1em; margin-top: 1em; mso-add-space: auto; text-align: justify;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt; line-height: 115%;">Mixed fund cleansing for all non-doms</span></i><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt; line-height: 115%;">: a two year window starting on 6 April 2017 in which non-doms can segregate money in mixed fund accounts by transferring the income and capital gain element to another <u>offshore</u> account, enabling them to remit the clean capital element left behind in the original account without a UK tax charge.<span style="mso-spacerun: yes;">&nbsp; </span>Some uncertainty around the finer points of this opportunity remains.<span style="mso-spacerun: yes;">&nbsp; </span>Further guidance from HMRC is (over)due.<span style="mso-spacerun: yes;">&nbsp; </span>However, use this period to start examining account composition.</span></span></span></span></div><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><br /></span></span></span></li><div style="color: black; font-family: Times New Roman; font-size: 12pt; font-style: normal; font-weight: normal; margin-bottom: 1em; margin-top: 1em; mso-add-space: auto; text-align: justify;"></div><br /><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10pt; font-style: normal; font-weight: normal;"><span style="font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10pt;"><br /></span></div><br /><br /><br /></li></ul>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-74647981055102958182017-09-21T11:54:00.003+01:002017-09-21T11:54:33.752+01:00Can you disinherit your children if you want to? <br /><div style="line-height: 150%; margin: 6pt 0cm 10pt;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">You may recall that, a couple of years ago, the English press was full of reports of the Will case of <i style="mso-bidi-font-style: normal;">Ilott</i> v <i style="mso-bidi-font-style: normal;">Mitson</i>.&nbsp; (For some background on the case, see my </span></span><a href="http://wealthlawyeruk.blogspot.co.uk/2015/08/nearest-but-not-necessarily-dearest.html"><span style="mso-bidi-font-family: Arial;"><span style="color: blue; font-family: Arial;">2015</span></span></a><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;"> and </span></span><a href="http://wealthlawyeruk.blogspot.co.uk/2017/03/ilott-v-mitson-supreme-court-decision.html"><span style="mso-bidi-font-family: Arial;"><span style="color: blue; font-family: Arial;">2017</span></span></a><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;"> blogs about it.)&nbsp; </span></span></div><br /><div style="line-height: 150%; margin: 6pt 0cm 10pt;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">The case was of interest to any testator who is considering cutting out children from their Will.&nbsp; However the Ilott case has now been applied in the more recent case of <i style="mso-bidi-font-style: normal;">Nahajec</i> v <i style="mso-bidi-font-style: normal;">Fowle</i> [2017] EW Misc 11 (CC), in which another impecunious child applied to the court and was successful in obtaining provision from her father’s estate, contrary to her father’s express wish that she should receive nothing.&nbsp; So what can the <i style="mso-bidi-font-style: normal;">Nahajec</i> case teach us about whether it is possible, even, for parents to successfully exclude adult children from receiving any inheritance from them?</span></span><a name='more'></a><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">Under the Inheritance (Provision for Family and Dependants) Act 1975, children may apply to court for such provision as ‘would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance’, which case law has determined means ‘provision to meet the everyday expenses of living’ and can extend to the payment of a child’s debts.&nbsp; A successful application to court can result in the terms of the deceased’s Will being overridden, if ‘looked at objectively, his disposition or lack of disposition produces an unreasonable result in that it does not make any, or any greater, provision for the applicant’.<span style="mso-spacerun: yes;">&nbsp; </span>The test is not one of whether the deceased acted unreasonably.&nbsp; The assessment of whether reasonable provision has been made is to be carried out by the court objectively but, in doing so, it must have regard to a number of factors set out in statute.&nbsp; The deceased’s wishes are not expressly stated as one of them but the court can have regard to ‘any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant’.</span></span><br /> <br /><div style="line-height: 150%; margin: 6pt 0cm 10pt;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">In this case, Stanley Nahajec had not been in recent contact with any of his three children at the date of his death.&nbsp; He had two sons from his first marriage and a daughter from a later relationship.&nbsp; He left his £266,000 estate to a long-standing friend, who himself was in some financial difficulty.&nbsp; By the time the case went to court, one son, who was prevented from working due to disability and ill health, had applied to the court for maintenance from the estate and had been paid £22,000 (it is not clear whether this was a settlement negotiated before the matter went to court, or a judgment).&nbsp; The other had chosen not to claim and therefore this case concerned the 31 year old daughter who, despite a recent health scare, was in low paid employment.&nbsp;&nbsp; However, she had fallen into significant debt. </span></span></div><br /><div style="line-height: 150%; margin: 6pt 0cm 10pt;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">In a letter of wishes accompanying his Will, the deceased explained that he was estranged from his children but he thought that all his children were ‘sufficiently independent of means not to require any provision’ and therefore it was not appropriate or necessary to make provision for them.&nbsp; In his lifetime, the deceased was in the habit of putting the phone down on his daughter when she tried to contact him and gave her no financial assistance.&nbsp; </span></span></div><br /><div style="line-height: 150%; margin: 6pt 0cm 10pt;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">The statute’s requirement for objective financial provision for maintenance seems difficult to overcome in the case of children in straitened financial circumstances.&nbsp; The wishes of the deceased are not the last word on the matter.&nbsp; The financial resources, financial needs and conduct of any applicant, and of the estate’s beneficiaries named in any Will or under the intestacy rules, are relevant to the court’s determination. While a testator can choose the extent to which contact or assistance is given by him in his lifetime, he cannot completely control the financial circumstances of his children, of course.&nbsp; For that reason alone, the <i style="mso-bidi-font-style: normal;">Nahajec</i> case underlines, once again, that there is no concept of unfettered testamentary freedom under English law and it is not possible to guarantee the outcome of any application to court by a child of the deceased unless, perhaps, the child is an adult and clearly standing financially on his own two feet. </span></span></div><br /><div style="line-height: 150%; margin: 6pt 0cm; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"><span style="mso-bidi-font-family: Arial;"><span style="font-family: Arial;">So is there anything that can be done?&nbsp; It is not possible to oust the jurisdiction of the court to prevent children applying to claim for provision.&nbsp; Testators might consider making provision for a life interest for a child, to provide the child with income for maintenance, whilst preserving the capital required to support the life interest in trust for the preferred heir, after the child’s death.&nbsp; Alternatively, in anticipation of a capitalised maintenance award, as occurred in the <i style="mso-bidi-font-style: normal;">Nahajec</i> case, a life policy written in trust could be taken out to provide a capital sum to be used to pay off the child.&nbsp; Testators should also be aware that if there is a need to obtain a grant of probate after death, the value of the testator’s estate becomes public knowledge and may encourage children to apply.&nbsp; However, with careful planning it is not always necessary to obtain a grant after death.</span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-65628032156059643292017-09-07T12:04:00.003+01:002017-09-07T12:04:31.535+01:00IHT Residence Nil Rate Band: depending on downsizing?<span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;"></span><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">HMRC have published new guidance covering the downsizing provisions of the Residence Nil Rate Band (<b style="mso-bidi-font-weight: normal;">RNRB</b>) (click </span><a href="https://www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;"><span style="color: blue;">here</span></span></a><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;"> for a link to it).<span style="mso-spacerun: yes;">&nbsp; </span>This will be of interest to advisers looking for a relatively straightforward introduction to this aspect of the RNRB which may be suitable for forwarding on to clients. </span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">Whenever individuals interested in their IHT planning downsize, gift or sell a property, the impact on the availability of the RNRB should be considered.</span><a name='more'></a><br /><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">The RNRB offers individuals who have an estate worth £2,000,000 or less (or who carry out planning in their lifetime to ensure that their estate falls below this figure on death), survived by certain family members (lineal descendants only), the opportunity to transfer a further sum free of Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>) on death, in addition to the IHT Nil Rate Band (<b style="mso-bidi-font-weight: normal;">NRB</b>).<span style="mso-spacerun: yes;">&nbsp; </span>Currently a fully available RNRB and NRB would allow an individual to transfer up to £425,000 free of IHT to his heirs on death, although this figure will rise to £500,000 if death occurs after 6 April 2020.<span style="mso-spacerun: yes;">&nbsp; </span>The RNRB must be claimed by the individual’s personal representatives within two years of the end of the month of death. </span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">The RNRB usually requires lineal descendants to inherit a qualifying residential property on the individual’s death.<span style="mso-spacerun: yes;">&nbsp; </span>However, all is not necessarily lost if the individual sells or gives away a residence, or downsizes to a less valuable residence before they die.<span style="mso-spacerun: yes;">&nbsp; </span>All of the following conditions must apply for the ‘downsizing addition’ to be available:</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-style: normal; font-weight: normal;"><div style="color: black; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-list: l0 level1 lfo1; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">the individual sold, gave away or downsized to a less valuable residence on or after 8 July 2015;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-list: l0 level1 lfo1; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">the former residence would have qualified for the RNRB if it had been retained until death; and</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-list: l0 level1 lfo1; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">lineal descendants must inherit at least some of the estate.</span></div></li></ul><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">The downsizing addition aims to put individuals in the same position that they would have been in under the RNRB, if they owned a residence, or a more valuable one, which they disposed of before their death but after the cut off date of 8 July 2015 (Budget Day).<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">However, HMRC’s guidance states that its availability ‘will also depend on the value of the other assets left to direct descendants’.<span style="mso-spacerun: yes;">&nbsp; </span>It’s important to make sure, therefore, that assets of a value at least equivalent to the available downsizing addition are left to lineal descendants.<span style="mso-spacerun: yes;">&nbsp; </span>If this does not happen, some or all of the downsizing addition may be lost.<span style="mso-spacerun: yes;">&nbsp; </span>Remember that the downsizing addition can be increased by a transferable element if the deceased was married.<span style="mso-spacerun: yes;">&nbsp; </span>Particular care is needed if an individual downsizes to a smaller property and intends to leave it to someone other than a lineal descendant on death.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">It may be possible to use a deed of variation within two years of a death occurring to ‘rescue’ any downsizing addition that might otherwise be lost.<span style="mso-spacerun: yes;">&nbsp; </span>However, only adults of full capacity can enter into deeds of variation so they should not be relied upon as a planning strategy!<span style="mso-spacerun: yes;">&nbsp; </span>Ensuring that the Will is correctly drawn to capture any available downsizing addition is far more preferable. </span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span></div><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><span style="font-family: Times New Roman;"> </span><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">Worked examples of downsizing calculations can be found in HMRC’s guidance and in the dedicated section of their IHT Manual, </span><span style="font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46057"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;"><span style="color: blue;">here</span></span></a></span><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">.<span style="mso-spacerun: yes;">&nbsp; </span>They are helpful but only serve to demonstrate just how complex the new rules are!</span></div><ul style="direction: ltr; list-style-type: disc;"></ul><div style="line-height: 150%; margin: 0cm 0cm 0pt; text-align: justify;"><br /></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-71010190738134947792017-07-27T10:11:00.002+01:002017-07-27T10:11:34.089+01:00Inheritance Tax planning for business owners is often overlooked <br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><span style="font-family: Arial;">When it comes to selling up or transferring on a business to the next generation, entrepreneurs and family business owners are usually encouraged to take measures to reduce the level of Capital Gains Tax payable on the disposal of the business.&nbsp; Far fewer entrepreneurs are advised to consider their Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>) planning, though, and yet failure to consider the IHT aspects of a sale can cost families dearly in the long term, when 40% IHT is levied on the proceeds of the business sale in due course.</span><a name='more'></a><span style="font-family: Arial;">Many think of IHT as a tax which only afflicts family wealth if the business owner is still holding the proceeds of the business sale on their death.&nbsp; However, IHT is a complex tax, affecting lifetime gifts as well as assets held on death.&nbsp; Successful IHT planning is not just about being caught with the proceeds ‘when the music stops’ (i.e. on death!).&nbsp; It is not the tax equivalent of a game of musical chairs! </span><br /> <br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><span style="font-family: Arial;">Successful IHT planning for business owners starts pre-sale, with a proper evaluation of whether any part of the value attributable to what is being sold qualifies for IHT Business Property Relief (<b style="mso-bidi-font-weight: normal;">BPR</b>).&nbsp; Simply put, this generous IHT relief can be used to allow an interest in a qualifying trading business/partnership or unquoted shares in a trading company to be transferred to the next generation completely free of IHT.&nbsp; As the 2009 <i>Nelson Dance</i> case demonstrated, BPR doesn’t just apply to the sale of a qualifying business either – it can apply to the sale of assets used in a qualifying business as well.&nbsp; The effect of the relief is to reduce the value for IHT purposes of what might otherwise be a chargeable transfer for IHT.&nbsp; At its most generous extent, any IHT that would otherwise be payable on a transfer of a qualifying interest or qualifying assets is entirely relieved.&nbsp; With careful planning, it does not matter if the business owner fails to survive the transfer by the usual seven year period that is needed for the purposes of IHT.</span></div><br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><span style="font-family: Arial;">If there would be concerns about transferring a business to the next generation outright, transferring the business into a structure for the next generation’s benefit is possible too, if the business owner wishes to retain control of the business and yet still be treated as having made a gift for IHT purposes.&nbsp; However, if a trust is to be used, it is imperative that pre-sale planning is carried out because, unless BPR qualifying assets are placed into the trust, the amount of value that can be put into the trust is limited to the available IHT ‘Nil Rate Band’ – currently £325,000.&nbsp; The following example highlights this important but often overlooked planning point:</span></div><br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><i><span style="font-family: Arial;">Richard has built up a successful business in the IT sector over the past decade.&nbsp; He is now ready to sell to a private equity fund.&nbsp; Part of the deal involves Richard selling his shares for £5 million.&nbsp; He has two teenage children and pays for their private education.&nbsp; In due course he wants to fund them through university and pay for their first homes.&nbsp; He thinks he will need a fund of £3 million to do that.&nbsp; The shares qualify for 100% BPR.&nbsp; </span></i></div><br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><i><span style="font-family: Arial;">If he puts £3 million of shares into a trust for his children (with a carefully drafted trust, he can still retain control of them during the sale process), on an eventual sale, the trustees will then hold £3 million of the sale proceeds in the trust.&nbsp; Richard will have got £3 million of value into the trust without having to pay any IHT upfront. </span></i></div><br /><div style="line-height: 115%; margin: 6pt 0cm 10pt;"><i><span style="font-family: Arial;">However, if Richard allows the sale to go through and only then thinks about putting £3 million of the sale proceeds into trust, he will have an immediate IHT charge of at least £535,000, as lifetime transfers to virtually every kind of trust give rise to an immediate charge to IHT at a rate of 20%.&nbsp; Richard can put, at most, £325,000 of the sale proceeds into trust for his children.&nbsp;&nbsp; </span></i></div><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-fareast-font-family: &quot;Times New Roman&quot;; mso-fareast-language: EN-GB;">There are other taxes to consider but the above example illustrates the IHT point.&nbsp; An unlimited amount of assets qualifying for IHT BPR can be put into a trust.&nbsp; However, leave it until after the sale and business owners can only put £325,000 of cash sale proceeds into trust (or £650,000 at most for married couples), as cash does not qualify for BPR.&nbsp; It may be possible for Richard to carry out some remedial IHT planning post-sale but it is not ideal.&nbsp; Business owners miss pre-sale IHT planning opportunities at their cost.</span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-fareast-font-family: &quot;Times New Roman&quot;; mso-fareast-language: EN-GB;"><br /></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-fareast-font-family: &quot;Times New Roman&quot;; mso-fareast-language: EN-GB;"><em><span style="font-size: x-small;">Wealth Lawyer UK takes its annual summer&nbsp;break in August and&nbsp;will return&nbsp;on Thursday 7 September.&nbsp; Happy holidays to all&nbsp;readers near and far!</span></em>&nbsp;</span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-66168695363629235252017-07-13T08:10:00.002+01:002017-07-13T08:10:44.714+01:00UK beneficial ownership registers: now it’s your turn, trustees <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">On 26 June 2017, the UK Government introduced a beneficial ownership register for trusts for the first time, in response to its need to comply with the EU’s 4th Anti-Money Laundering Directive.<span style="mso-spacerun: yes;">&nbsp; </span>Which trusts will be affected and what will trustees have to do?</span><a name='more'></a><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">The changes, contained in UK Regulations, affect both UK and non-UK trusts.<span style="mso-spacerun: yes;">&nbsp; </span>A UK trust is defined as either one where all the trustees are resident in the UK or where there is at least one UK resident trustee and the settlor was resident and domiciled in the UK either when the trust was set up or when funds are added to it.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Residency means tax resident for UK tax purposes.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">A non-UK trust, defined as any trust which is not a UK trust, will have to comply with the Regulations if it receives income from a source in the UK or has assets in the UK on which it is liable to pay certain UK taxes – Income Tax, Capital Gains Tax, Inheritance Tax, SDLT or Scottish LBTT, and SDRT. </span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">The trustees of affected trusts have three core obligations under the new Regulations:</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l1 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">Keep accurate and up-to-date records of all beneficial owners and potential beneficiaries referred to ‘in a document from the settlor relating to the trust such as a letter of wishes’. <span style="mso-spacerun: yes;">&nbsp;</span>Paid professional trustees must retain these records for five years after the date on which the final distribution is made from the trust.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l1 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">When dealing with the likes of financial institutions, lawyers, accountants and estate agents, trustees must identify themselves as trustees and provide beneficial ownership information to them, updating that information during the course of the relationship if necessary.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l1 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">Trustees who are liable for any of the UK taxes mentioned above are also obliged to provide information about the beneficial owners of the trust and potential beneficiaries to HMRC and, on request, to other defined law enforcement agencies, which include the Financial Conduct Authority in addition to the Police.<span style="mso-spacerun: yes;">&nbsp;&nbsp;</span><span style="mso-spacerun: yes;">&nbsp;</span></span></div></li></ul><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l1 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;"><span style="mso-spacerun: yes;"></span></span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">A ‘beneficial owner’ of a trust includes the settlor, trustees, beneficiaries (or where not all of the individuals benefitting from the trust have been determined, the class of persons in whose main interest the trust is set up or operates), and any individual who has ‘control’ over the trust, which is defined in the Regulations and would include a protector or someone with the power to appoint or remove trustees or beneficiaries.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">HMRC is required to maintain a register of beneficial owners and potential beneficiaries of taxable trusts.<span style="mso-spacerun: yes;">&nbsp; </span>It seems the register will not be made public.</span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">For existing trusts which are taxable, information must be provided to HMRC on or before 31 January 2018.<span style="mso-spacerun: yes;">&nbsp; </span>Trusts set up after this date would have until 31 January following the tax year in which they are first liable to pay UK taxes to report beneficial ownership information to HMRC.<span style="mso-spacerun: yes;">&nbsp; </span>So a trust set up on 1 November 2018 which will be liable to pay UK tax will have until 31 January 2020 to provide beneficial ownership information to HMRC.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span></span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">It is not entirely clear from the Regulations whether trustees only need to report to HMRC in respect of a tax year in which they were liable to pay UK taxes or whether, once a report for a tax year has had to be made, the trustees are obliged to continue to report thereafter.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>In the absence of any guidance from HMRC at present, it seems that if, for example, the only asset of a trust is a property occupied by a beneficiary rent free, the trustees will not have any UK tax liability and therefore any obligation to report beneficial ownership information to HMRC, but will still have an obligation under UK law to keep beneficial ownership information and provide it when dealing with certain professionals.<span style="mso-spacerun: yes;">&nbsp; </span>However in the year in which the trustees disposed of that property, triggering a liability to Capital Gains Tax, beneficial ownership information would also have to be provided to HMRC by 31 January after the end of the tax year in which the tax liability arose.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">The information that the trustees will need to give to HMRC is extensive, as follows:</span></div><br /><ul><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">name of the trust;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">date on which the trust was set up;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">a statement of account describing the trust assets, including the address of any real estate held by the trust, and identifying the value of each category of the trust assets at the date of the first report;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">the country of tax residency of the trust;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">the place of administration of the trust;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">contact details for the trustees;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">names of advisers who are paid to provide legal, financial or tax advice to the trustees in connection with the trust;</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-list: l0 level1 lfo2;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">details of the trust’s beneficial owners, including an individual beneficiary’s full name, date of birth, their role in relation to the trust and UK national insurance or tax reference number or, if none, usual residential address and, if that address is outside the UK, the individual’s passport or ID card details or equivalent form of identification.<span style="mso-spacerun: yes;">&nbsp; </span>Separate requirements apply to beneficiaries who are legal entities.<span style="mso-spacerun: yes;">&nbsp; </span>If the beneficial owners include a class of beneficiaries, not all of whom have been determined, it will suffice if a description of the class is given instead. <span style="mso-spacerun: yes;">&nbsp;&nbsp;</span></span></div></li></ul><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">HMRC has now published a link to its new Trusts Online Service, through which new trusts can obtain a trust tax reference number (replacing the paper Form 41G) and at the same time provide their beneficial ownership information.<span style="mso-spacerun: yes;">&nbsp; </span>Existing trusts with a UK tax liability also need to register with the Service to provide their beneficial ownership information.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Only trustees or their advisers with a Government Gateway account can access the online link.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">The legislation expressly provides that trustees cannot be made liable for making disclosures in accordance with their obligations under the Regulations but this is unlikely to provide comfort to trustees whose trusts are governed by non-UK law.<span style="mso-spacerun: yes;">&nbsp; </span>Trustees will want to be clear about the extent of their regulatory obligations to be sure that they are not exposed to claims of breach of confidentiality by their beneficiaries.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span><span style="mso-spacerun: yes;">&nbsp;&nbsp;</span></span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">Personal representatives of complex estates, meaning estates worth in excess of £2.5 million or where the tax due for the entire administration period exceeds £10,000, or if the value of assets sold in any tax year exceeds a certain threshold (£500,000 for deaths after April 2016), will also have similar reporting obligations to those of trustees. </span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB;">The information needed is extensive and, for existing trusts liable to UK tax in the current tax year, the deadline to provide information to HMRC will be 31 January 2018.<span style="mso-spacerun: yes;">&nbsp; </span>However the obligation on trustees to maintain written records appears to have come into force on 26 June!<span style="mso-spacerun: yes;">&nbsp; </span>Trustees who need to engage financial or professional advice from now on will need to provide beneficial ownership information.<span style="mso-spacerun: yes;">&nbsp; </span>Therefore trustees should be taking steps now to collate beneficial ownership information and, if the trustees are liable to UK taxes, consider obtaining valuations of trust assets to provide HMRC with the required statement of account.<span style="mso-spacerun: yes;">&nbsp; </span>Trustees may also consider asking settlors to review their letters of wishes.<span style="mso-spacerun: yes;">&nbsp; </span><span style="mso-spacerun: yes;">&nbsp;</span></span></div><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">What sanction is there likely to be for trustees who are non-compliant, particularly for non-UK trusts outside of the UK jurisdiction?<span style="mso-spacerun: yes;">&nbsp; </span>Failure to comply with UK money laundering requirements is a criminal offence under the Regulations but, on a more practical level, the trustees’ UK accountants, lawyers, investment managers and letting agents are unlikely to feel able to do business with non-compliant trustees after January 2018.</span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-1545638923137829182017-06-29T08:58:00.001+01:002017-07-03T08:04:25.992+01:00Who owns the equity? Investment property ownership when relationships break down<br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: &quot;calibri&quot;;">The thorny issue of a couple’s beneficial interests in a jointly owned property following relationship breakdown has once again been examined by the court, this time relating to a Privy Council decision on appeal from the Bahamian Court of Appeal.<span style="mso-spacerun: yes;">&nbsp; </span>The case concerned the relationship between Mr Marr and Mr Collie, who together had jointly purchased several properties over the years in the Bahamas during their 17 year relationship.</span></span><a name='more'></a><span style="mso-ansi-language: EN-GB;"><span style="font-family: &quot;calibri&quot;;">The last major decision on this point came out of the 2007 English case of<i style="mso-bidi-font-style: normal;"> Stack</i> v <i style="mso-bidi-font-style: normal;">Dowden</i>.<span style="mso-spacerun: yes;">&nbsp; </span>It confirmed the principle that, in domestic situations, ‘the starting point where there is joint legal ownership is joint beneficial ownership...unless and until the contrary is proved’.<span style="mso-spacerun: yes;">&nbsp; </span>To reach a different outcome, there needed to be evidence that the parties shared a common intention that the beneficial ownership should be held unequally.<span style="mso-spacerun: yes;">&nbsp; </span>The intention need not be expressly stated by either of the parties – inferences from conduct and conversations throughout the relationship would be relevant.<span style="mso-spacerun: yes;">&nbsp; </span>This mode of analysis was to be preferred to the legal principle of a presumption of a resulting trust, where joint owners of property hold the entire beneficial interest on trust for whichever of them pays the purchase price, if only one of them had paid for it.<span style="mso-spacerun: yes;">&nbsp;&nbsp;</span><span style="mso-spacerun: yes;">&nbsp;</span></span></span><br /></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;"><i style="mso-bidi-font-style: normal;"><span style="mso-ansi-language: EN-GB;">Stack</span></i><span style="mso-ansi-language: EN-GB;"> concerned the beneficial ownership of a home.<span style="mso-spacerun: yes;">&nbsp; </span>However, in the <i style="mso-bidi-font-style: normal;">Marr</i> case, the relationship was both personal and commercial.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Mr Marr had funded the purchase of a home for him and Mr Collie but there were other residential properties, purchased as investments.<span style="mso-spacerun: yes;">&nbsp; </span>Although the facts were disputed between the parties, Mr Marr, a banker, used his own funds to pay the deposit and serviced any debt associated with their purchase, while Mr Collie provided his building skills.<span style="mso-spacerun: yes;">&nbsp; </span>No declaration of trust existed setting out how the equity was owned by the two parties.<span style="mso-spacerun: yes;">&nbsp; </span>Did the reasoning in <i style="mso-bidi-font-style: normal;">Stack</i> apply only to ‘the purely domestic setting’?<span style="mso-spacerun: yes;">&nbsp; </span>The court in <i style="mso-bidi-font-style: normal;">Marr</i> said no.</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: &quot;calibri&quot;;">The <i style="mso-bidi-font-style: normal;">Marr</i> case is authority for extending the <i style="mso-bidi-font-style: normal;">Stack</i> approach to jointly acquired investment property, where there is an element of commercial endeavour as well as a personal relationship.<span style="mso-spacerun: yes;">&nbsp; </span>The intention of the parties is still critical where a property is bought in the joint names of a cohabiting couple, even if the purchase is for pure investment. <span style="mso-spacerun: yes;">&nbsp;&nbsp;</span>Putting a property into joint names is evidence of intention but not conclusive evidence.<span style="mso-spacerun: yes;">&nbsp; </span>Purely commercial transactions, where there is no intention to derive any mutual benefit, continue to fall outside the<i style="mso-bidi-font-style: normal;"> Stack</i> common intention analysis.<span style="mso-spacerun: yes;">&nbsp; </span>The case also extends the <i style="mso-bidi-font-style: normal;">Stack</i> analysis to a wide range of jointly owned assets, in this case including a car, boat and artwork.</span></span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-41456457289825225332017-06-15T09:10:00.000+01:002017-06-16T08:42:52.588+01:00Will we have a UK public register for offshore entities owning UK property?<br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">The UK may become the first country to introduce a beneficial ownership register for overseas companies and other legal entities owning UK property (of any kind) or who wish to procure UK Government work. </span><a name='more'></a><br /></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">According to the Government’s April 2017 ‘Call for Evidence’ publication, the register will be modelled on the existing UK Persons of Significant Control (<b style="mso-bidi-font-weight: normal;">PSC</b>) register for companies, with the information publicly available at Companies House. </span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">Currently the legal ownership of registered UK properties is publicly displayed at the Land Registry.<span style="mso-spacerun: yes;">&nbsp; </span>Where a UK company owns a property, the company’s name is recorded on the title of the property and so the PSC register shows who ultimately owns the UK company.<span style="mso-spacerun: yes;">&nbsp; </span>The Government faces the difficulty of providing helpful transparency for tenants and neighbours while ensuring that the obligations are not so onerous that they discourage overseas investment in the UK.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">The Government is proposing that any company which currently owns a UK property, or wishes to purchase one, applies to Companies House with information about each beneficial owner which mirrors that currently requested under the PSC (name, date of birth, address, nationality and the nature of their interest), unless the beneficial owner is an entity that reports its beneficial ownership on another public register. <span style="mso-spacerun: yes;">&nbsp;</span>Privacy exemptions will be considered where the beneficial owner is a person of interest or may be at risk of violence or intimidation. The company will then receive a registration number.<span style="mso-spacerun: yes;">&nbsp; </span>Without this number, the Land Registry will not transfer legal title or create a long leasehold interest.<span style="mso-spacerun: yes;">&nbsp; </span>Potentially a contract for purchase or sale could be voided.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">The need to provide information will not be a one-off exercise.<span style="mso-spacerun: yes;">&nbsp; </span>Each company will have to update their records every two years in order to maintain their registration number. The Government may make failure to maintain the register a criminal offence. <span style="mso-spacerun: yes;">&nbsp;</span>Offshore entities already owning UK property will have 12 months to obtain a registration number.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">Concerns have been raised about the impact that this may have on a buyer’s or seller’s willingness to deal with an offshore company.<span style="mso-spacerun: yes;">&nbsp; </span>As well as the risk of a voided transfer, a seller may end up acting as a trustee for an offshore company buyer post completion.<span style="mso-spacerun: yes;">&nbsp; </span><span style="mso-spacerun: yes;">&nbsp;</span>Lenders may find themselves unable to sell the property to redeem their charge, if the registered owner is an offshore company which has not complied with its requirements under the register.<span style="mso-spacerun: yes;">&nbsp; </span>It seems inevitable that requesting proof that the offshore company has the registration number will form part of the pre-exchange enquiries. <span style="mso-spacerun: yes;">&nbsp;</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">Not only will the directors of an offshore company need to compile information about the beneficial owners, they must also confirm this information with those owners.<span style="mso-spacerun: yes;">&nbsp; </span>Is the solution that an offshore company should provide this information to Companies House in advance of purchasing a UK property, so that it is ready to proceed with no delay once it has found one?<span style="mso-spacerun: yes;">&nbsp; </span>This would seem to require an offshore company to provide information to the Government before it even has any interest in the UK!</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;calibri&quot;;">From the Government’s consultation, it seems that it is aware of many of these issues and intends to deal with them.<span style="mso-spacerun: yes;">&nbsp; </span>The consultation closed in mid May and so we must now wait for the outcome to see how workable the Government’s solutions will be.<span style="mso-spacerun: yes;">&nbsp; </span></span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-52481483654934394772017-06-01T08:14:00.000+01:002017-06-01T08:15:30.745+01:00To Airbnb or not to Airbnb?<span style="font-size: small;"><span style="font-family: &quot;arial&quot; , &quot;helvetica&quot; , sans-serif; font-size: small;">This week, I have a guest post from my colleague Grace Laws in our Property team, with her&nbsp;advice on the legal dos and don'ts of Airbnb letting:</span></span><span style="font-family: &quot;arial&quot;; font-size: xx-small;"><br /></span><br /><span style="font-family: &quot;arial&quot;; font-size: xx-small;"><br /></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Airbnb has become known as the world’s largest accommodation provider but it owns no property. It gives property owners an opportunity to let their properties out on a short-term basis with relative ease and gives consumers an opportunity to stay in a home and ‘live like a local’ in their location of choice. As a result of this it has become well known in recent years and is used frequently by many.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span><br /></span><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">For property owners it has become an easy and profitable way of generating additional income, particularly for those with residential properties in desirable city centre locations. However, if you choose to use Airbnb or any other short-term letting website for letting your property, it is important that you consider the legal consequences of doing so alongside the financial benefits.</span></span><br /><a name='more'></a><span style="font-family: &quot;arial&quot;; font-size: x-small;">The key legal factors to consider are:</span><br /><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">Are you properly insured?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Airbnb offers the following insurance as part of its business terms:</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><ul style="direction: ltr; list-style-type: disc;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><li style="color: #31343f; font-style: normal; font-weight: normal;"><div style="background: rgb(250, 249, 249); color: black; font-style: normal; font-weight: normal; line-height: 15.75pt; margin-bottom: 0pt; margin-top: 0cm; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Host Guarantee: Airbnb agrees to pay you to repair or replace certain covered property (i.e. your belongings) which is damaged or destroyed as a result of certain covered losses.</span></div></li><li style="color: #31343f; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 12pt; font-style: normal; font-weight: normal;"><div style="background: rgb(250, 249, 249); color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-size: 11pt; font-style: normal; font-weight: normal; line-height: 15.75pt; margin-bottom: 0pt; margin-top: 0cm; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Host Protection Insurance: Airbnb agrees to provide primary liability coverage up to a certain amount if a guest makes a claim for bodily injury or property damage.&nbsp; It may also cover claims if a guest damages the property itself.</span></div></li></span></ul><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Whilst this does provide comfort to property owners, as is the case with any insurance policy, the terms and conditions should be read carefully for exclusions and limitations.&nbsp; You need to ensure that the insurance provided applies to your property and your individual situation.&nbsp; This is particularly important where you do not have anyone managing the property on your behalf and monitoring whether guests are using the property appropriately.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Remember that the Airbnb insurance does not replace the need to have your own buildings and contents insurance.&nbsp; If you have a mortgage, the terms of the mortgage deed will require you to maintain buildings insurance too (or ensure that your landlord insures if the property is leasehold).&nbsp; Again, you need to check the terms of these policies too to ensure they are not invalidated by renting out your property. Usually a notification to your insurer is required when your property is being let out for short-term lettings.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">Will you breach your mortgage terms?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Your mortgage is likely to contain restrictions on how you can use your property (in both the facility letter and mortgage deed).&nbsp; You need to check the terms to ensure that short-term lettings are permitted.&nbsp; If they are not, entering into a short-term letting will breach the mortgage terms and may be an event of default under the mortgage allowing the lender to enforce its security (i.e. take steps to call back the loan).</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">Will you breach planning regulations?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Planning controls are also important to consider, both at local and national level. In some areas a short-term let may be considered as a material change of use (i.e. a change of use from residential use without planning consent).&nbsp; This has been a problem for Airbnb in cities around the world and has resulted in penalties being issued on some occasions.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">In 2015 an exception was introduced to allow properties in London to be used as temporary sleeping accommodation without this being considered a change of use, provided the total number of nights the property is used for short-term lettings does not exceed 90 nights in a calendar year.&nbsp; There are restrictions to this exception, so if you are considering using it you need to ensure the exception applies to your property. Airbnb has been trying to assist with making their service more compliant with local and national laws.&nbsp; As a result the Airbnb system now automatically limits entire home listings in the Greater London area to 90 nights a year unless the property owner confirms that they have the required planning permission.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">If your property is leasehold (rather than freehold) will you breach your lease terms?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Many leases restrict the ability of the tenant to sublet their property or only allow sublettings if landlord’s consent is obtained.&nbsp; Leases usually restrict the use of your property (i.e. to residential use) and require you to comply with planning laws affecting the property. A recent case held that a tenant had breached a covenant which prohibited use of their flat for any purpose other than as a private residence, as they had advertised the flat on the internet for short-term lettings and granted a series of such lettings.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Most leases will allow the landlord to forfeit (i.e. terminate the lease by bringing court proceedings) for breach of covenant.&nbsp; A landlord would also be able to bring a claim for a monetary payment if it could prove it had suffered a loss.&nbsp; A tenant can apply to court for relief from forfeiture but will need to remedy the breach (i.e. stop entering into short-term lettings) in order to prevent the lease being terminated.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Many residential leases also include regulations controlling how all tenants in the building use the building (for example, restricting noise levels, pets, use of common parts).&nbsp; Even if landlord consent is not required for short-term lettings, guests need to observe these regulations during their stay at your property.&nbsp; Airbnb allows property owners to set “house rules” during the booking process and you need to ensure these include complying with any building regulations imposed by your lease.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">Should you make arrangements to have the property managed?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Although Airbnb and similar sites offer an opportunity for individuals to maximise rental value from their properties they do not provide a management service.&nbsp; Some owners have code accessed boxes to allow guests to pick up keys but it is prudent to have someone assist in managing your property (making keys available and dealing with any issues arising).&nbsp; As a property owner you might expect guests to be using your property for holiday or business stays but there are instances of properties being used to host parties.&nbsp; Airbnb allows you to vet your guests by viewing their profile, which is important (as are reviews from previous Airbnb stays).&nbsp; However, having someone on hand to deal with issues is advisable.&nbsp; From a security perspective, this also helps to ensure that the property is not seen by the public as being left unattended for long periods of time.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><h3 style="background: rgb(250, 249, 249); margin: 3.75pt 0cm 9.75pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; mso-fareast-font-family: &quot;Times New Roman&quot;;"><span style="font-family: &quot;georgia&quot;; font-size: large;">To Airbnb or not to Airbnb?</span></span></span></h3><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">An increasing number of property owners regard Airbnb and other short-term letting sites as offering a unique opportunity for them to maximise rental value from their properties.&nbsp; However, it is important property owners have assessed the legal issues involved to ensure that they are making an informed choice, and that the financial benefits outweigh the legal and practical considerations.&nbsp; When deciding whether to “Airbnb or not to Airbnb” make sure you consider the legal issues involved.</span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span><br /><div style="background: rgb(250, 249, 249); line-height: 18pt;"><span style="font-family: &quot;arial&quot;; font-size: x-small;"><em><span style="color: #31343f; font-family: &quot;arial&quot; , &quot;sans-serif&quot;; font-size: 10.5pt;">Grace Laws, Associate, Fladgate LLP (<a href="mailto:glaws@fladgate.com"><span style="color: blue;">glaws@fladgate.com</span></a>)</span></em></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"><span style="font-family: &quot;times new roman&quot;; font-size: small;"> </span></span></div><span style="font-family: &quot;arial&quot;; font-size: x-small;"></span><br /><br /><br /><br /><br />Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-83379715975049280882017-05-18T08:06:00.001+01:002017-05-18T08:06:23.764+01:00Protecting personal representatives: interim estate distributions <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">How should a personal representative (<b style="mso-bidi-font-weight: normal;">PR</b>)<b style="mso-bidi-font-weight: normal;"> </b>deal with a request from a beneficiary for an interim distribution before the estate is finalised?<span style="mso-spacerun: yes;">&nbsp; </span>Estates can take many months to conclude but a beneficiary may be in need of some of their inheritance sooner.<span style="mso-spacerun: yes;">&nbsp; </span>Can an executor help out without putting him or herself on the line?</span><a name='more'></a><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Any PR (be they an executor of a Will or an administrator of an intestate estate) facing a request for an early distribution should consider their own position as well as the beneficiary’s.<span style="mso-spacerun: yes;">&nbsp; </span>A PR owns a duty to the court, both to gather in the assets of the deceased and also to ensure that sufficient estate assets are retained to meet all liabilities and pay creditors.<span style="mso-spacerun: yes;">&nbsp; </span>Not all liabilities may be evident at the time of death.<span style="mso-spacerun: yes;">&nbsp; </span>Failure to retain sufficient funds to pay these may result in creditors pursuing the PR personally, so a PR must exercise caution in the face of such requests. </span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"></span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Unless the PR was very familiar with the deceased’s finances, or the beneficiaries can be entirely trusted to return estate assets if necessary, a PR should consider taking advantage of the protection offered by s.27 of the Trustee Act 1925 and advertise for creditors in the London Gazette (and elsewhere if appropriate, depending upon the deceased’s circumstances).<span style="mso-spacerun: yes;">&nbsp; </span>Once the two month notice period has expired and if the PR has still received no notification of a claim prior to distribution, any creditor who appears after distribution has to pursue the recipient of the estate funds, rather than the PR.</span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Section 44 of the Administration of Estates Act 1925 provides that ‘a personal representative is not bound to distribute the estate of the deceased before the expiration of one year from the death’.<span style="mso-spacerun: yes;">&nbsp; </span>Accordingly PR’s cannot be forced to distribute sooner but could consider doing so if they are confident that all liabilities and creditors have been ascertained</span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">.<span style="mso-spacerun: yes;">&nbsp; </span></span><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">For deceased UK domiciliaries, PRs should be aware that claims under the Inheritance (Provision for Family and Dependents) Act 1975 can be issued up to 6 months after the Grant of Probate is itself issued and the claimant then has a further four months in which to serve the claim.<span style="mso-spacerun: yes;">&nbsp; </span>Therefore 1975 Act claimants can appear up to ten months after the Grant has issued.</span><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">If an interim distribution is needed sooner, a PR should consider insisting on a form of indemnity from the beneficiary to confirm that, should a claim be made against the PR in connection with the estate, the beneficiary will indemnify the PR for that claim out of the funds distributed.<span style="mso-spacerun: yes;">&nbsp; </span>The PR will need to consider whether that beneficiary will be good for the money if the indemnity needs to be relied upon.<span style="mso-spacerun: yes;">&nbsp; </span>Ideally the PR will also obtain confirmation from the beneficiary that the beneficiary accepts the sums distributed at least in partial satisfaction of their interest in the estate.<span style="mso-spacerun: yes;">&nbsp; </span>It may be appropriate to provide a set of draft estate accounts at this point.</span><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Alternatively, depending upon the assets comprising the estate and their administrative powers, the PR may be able to offer to loan a beneficiary a portion of their share of the estate, in return for a suitable indemnity.<span style="mso-spacerun: yes;">&nbsp; </span>This is likely to be more satisfactory for a PR, as the PR still retains ownership of the estate assets, albeit in the form of an IOU. <span style="mso-spacerun: yes;">&nbsp;</span>The creditworthiness of the beneficiary will need to be considered once again.<span style="mso-spacerun: yes;"></span></span><br /><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span style="mso-spacerun: yes;">&nbsp;&nbsp; </span></span><br /> <span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">Lay PRs, in particular, can often feel under pressure from family member beneficiaries to make early distributions.<span style="mso-spacerun: yes;">&nbsp; </span>However, creditors need make no exceptions for lay PRs! <span style="mso-spacerun: yes;">&nbsp;</span>The law allows PRs to protect themselves and a prudent PR will do just that. </span>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-28824137535968592722017-05-04T07:55:00.002+01:002017-05-04T07:55:31.825+01:00Finance Bill 2017: Non-dom tax changes dropped – for now? <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">The Finance Bill 2017 contained a number of measures altering the way in which long term UK resident non-doms and UK residential property held in certain offshore entities would be taxed in the UK.<span style="mso-spacerun: yes;">&nbsp; </span>However, last week it became clear that <i style="mso-bidi-font-style: normal;">all</i> of the non-dom tax changes would be dropped from the Finance Bill, to allow a slimmed down version of the Bill to progress through the legislative process before Parliament is dissolved ahead of the General Election on 8 June.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">So what is the current state of the law?<span style="mso-spacerun: yes;">&nbsp; </span>Are the relevant pre-6 April 2017 tax laws still in force?<span style="mso-spacerun: yes;">&nbsp; </span>Are non-doms who have been resident here in the UK for 15 out of the previous 20 tax years now deemed domiciled, or can they still make use of the remittance basis of taxation?<span style="mso-spacerun: yes;">&nbsp; </span>Does foreign corporate ownership of UK residential property still provide a UK Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>) shelter or not?</span><a name='more'></a><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Unhappily for clients and their advisers, no one can give definitive answers to these questions at this point.<span style="mso-spacerun: yes;">&nbsp; </span>The Government has said that it remains committed to the omitted provisions and intends to legislate for them at the earliest opportunity at the start of the new Parliament.<span style="mso-spacerun: yes;">&nbsp; </span>However, that presupposes that the same Government will be returned to power after the General Election.<span style="mso-spacerun: yes;">&nbsp; </span>Even then, it is unclear whether the non-dom measures in a new Finance Bill will be given retrospective effect from 6 April 2017 or whether their effective date will be delayed, perhaps to the start of the next tax year on 6 April 2018.</span><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">There is no single, right response to this unexpected announcement and any affected non-doms should ask their adviser to review their position and give them specific advice.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">A particular issue affecting holders of UK residential property in offshore structures (typically a family owned offshore company which itself owns the UK residential property) is whether the company should be liquidated now, if that has not already happened.<span style="mso-spacerun: yes;">&nbsp; </span>Unless the property is being let out on a commercial basis, it will be subject to the Annual Tax on Enveloped Dwellings (<b style="mso-bidi-font-weight: normal;">ATED</b>) while it remains in corporate ownership, so there is an incentive to liquidate and avoid any further ATED exposure.<span style="mso-spacerun: yes;">&nbsp; </span>However, in these cases, it has become a trade-off between IHT and ATED.<span style="mso-spacerun: yes;">&nbsp; </span>Is it worth remaining in the corporate structure, just in case it continues to provide an IHT shelter?<span style="mso-spacerun: yes;">&nbsp; </span>The price of playing this wait-and-see game can be measured in the ‘cost’ of the ATED payable with each day that the corporate structure is retained.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">The status of the rebasing and mixed fund cleansing opportunities for non-doms trailed in the Finance Bill are also now uncertain, and therefore any non-dom planning on making disposals to take advantage of either of these should also review their position before proceeding. </span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB;">The situation is highly unsatisfactory for both non-doms and their advisers and we can only hope that clarification of the current state of the law will follow swiftly after 8 June.<span style="mso-spacerun: yes;">&nbsp; </span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-78645094810000833192017-04-20T08:00:00.000+01:002017-04-20T08:00:19.168+01:00‘No looking back’ – one ATED tax trap to avoid <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">April is ATED filing month – 2017/2018 ATED tax returns must be filed and any ATED tax paid by 30 April at the latest.<span style="mso-spacerun: yes;">&nbsp; </span>Even if no ATED is due, because a relief from ATED applies, that relief still needs to be claimed on an ATED tax return, which must be submitted by the end April deadline just the <a href="https://www.blogger.com/null" name="_CurrentPage"></a>same.</span><a name='more'></a><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">ATED applies to companies owning UK let residential property too.<span style="mso-spacerun: yes;">&nbsp; </span>However, a 100% relief from ATED is available if the company is running a property rental business and the relief is claimed each year.</span><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">One crucial trap to guard against is occupation of the company’s property by a ‘non-qualifying individual’.<span style="mso-spacerun: yes;">&nbsp; </span>These include people who are ‘connected to’ the company, in the very wide sense conferred on that phrase by s.1122 Corporation Taxes Act 2010.<span style="mso-spacerun: yes;">&nbsp; </span>For example, the settlor of a trust which owns an interest in the corporate entity which owns the property will count as a ‘non-qualifying individual, as will the settlor’s relatives – meaning siblings, and either ancestral or lineal descendants – and even their respective spouses and their families!<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The non-qualifying individual has to be ‘permitted to occupy’, according to the ATED legislation, which may give an escape route if the directors of the company were not aware of the occupation and therefore could not have given permission, implied or express.<span style="mso-spacerun: yes;">&nbsp; </span>Unfortunately there is no definition of what ‘permitted to occupy’ means, either in the legislation or in HMRC’s ATED Technical Guidance.<span style="mso-spacerun: yes;">&nbsp; </span>However, in the content of other taxes, HMRC regards use of a property as occupation if the person who does stay at the property or uses it has a right of access to it and does keep belongings there.<span style="mso-spacerun: yes;">&nbsp; </span>No guidance is also given on how long a period of occupation is needed in order to trigger these provisions.<span style="mso-spacerun: yes;">&nbsp; </span>In an example given in the Technical Guidance, a month of occupation was long enough but there is no discussion of whether a week or even a few days would have been problematic.<span style="mso-spacerun: yes;">&nbsp; </span>Therefore, it’s best to try to avoid these murky waters if possible. <span style="mso-spacerun: yes;">&nbsp;</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">It is relatively easy for companies to find themselves in trouble over non-qualifying occupation.<span style="mso-spacerun: yes;">&nbsp; </span>The family member who stayed a few nights in the company’s London flat, in the void period between lettings, is a classic situation but unfortunately this can lead to an unhappy outcome.<span style="mso-spacerun: yes;">&nbsp; </span>The consequences of non-qualifying occupation can be severe:</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">ATED relief is denied for the whole of the ATED tax year in which the non-qualifying occupation takes place, unless there was a qualifying tenant renting the property as part of a property rental business prior to the non-qualifying occupation (in which case relief will be allowed for the period of ‘qualifying’ occupation).</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Relief is also denied for up to the next three ATED tax years, until such time as there is ‘qualifying occupation’.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">ATED relief is withdrawn for the previous ATED tax year if, in fact, there was no qualifying occupation during that tax year.<span style="mso-spacerun: yes;">&nbsp; </span>(This could be the case if the company was taking steps to rent out the property, such as alterations or redecoration, for which ATED relief is available if the steps are taken without undue delay).</span></div></li></ul><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">The look forward and look back provisions can result in companies owing ATED for tax years in which it was thought that an ATED relief was due.<span style="mso-spacerun: yes;">&nbsp; </span>The position needs to be corrected by submission of an amended ATED tax return for all years affected, as quickly as possible as time deadlines apply to the tax return filing.<span style="mso-spacerun: yes;">&nbsp; </span></span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-11933044765988483012017-04-06T08:27:00.000+01:002017-04-06T08:27:31.354+01:00LEIs and UK trusts: time to apply for another ID number <br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Trustees of UK trusts holding a UK managed investment portfolio will soon need to apply for a Legal Entity Identifier (<b style="mso-bidi-font-weight: normal;">LEI</b>) number from the London Stock Exchange. </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">The EU legislation known as the Markets in Financial Instruments Directive (MiFID) affects firms who provide services to legal entity end users which involve financial instruments, such as shares, bonds and collective investments.<span style="mso-spacerun: yes;">&nbsp; </span>Its latest incarnation, MiFID II, comes into effect on 3 January 2018.<span style="mso-spacerun: yes;">&nbsp; </span>It places upon them new transaction reporting obligations, meaning that they cannot execute a trade in a financial instrument on behalf of any client for whom they do not have an LEI.</span></span><a name='more'></a><span style="font-family: Calibri;">&nbsp;</span><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">The concept of the LEI has been endorsed by the G20 countries since 2011.<span style="mso-spacerun: yes;">&nbsp; </span>It aims to provide a unique, alphanumeric identifier to any legal entity or structure, including companies, charities and trusts, enabling it to be identified in any jurisdiction in the world in which it operates financially.<span style="mso-spacerun: yes;">&nbsp; </span>It is designed to enable verification of entities to take place quickly, wherever they are located, and to be the new, global standard in entity identification.</span></span><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">The London Stock Exchange has been authorised to issue LEI numbers in the UK.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Trustees can apply for them online or allow their authorised representative (such as the trust’s investment manager) to apply on their behalf.<span style="mso-spacerun: yes;">&nbsp; </span>Understandably, many financial intermediaries are offering assistance to their affected clients to help them complete the LEI application process in time.</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">If applied for directly, the LSE is charging a fee of £115 plus VAT to issue an LEI number and a fee of £70 plus VAT for each annual renewal thereafter, at which point the entity will be asked to provide updated information.</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Only trusts holding financial investments will need an LEI number, but bare trusts are exempt in any event.<span style="mso-spacerun: yes;">&nbsp; </span>As there is no publically available information to verify a trust’s credentials, it appears that the LSE will require sight of the first couple of pages of the trust deed as part of the application process.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">A central database of all issued LEI numbers is held by the Global Legal Entity Identifier Foundation (GLEIF), a not-for-profit organisation created in 2014 to support the implementation and use of the LEI.<span style="mso-spacerun: yes;">&nbsp; </span>The database is publically searchable and free to use.<span style="mso-spacerun: yes;">&nbsp; </span>At the moment, the database displays only basic details such as the entity’s name, address and LEI number.<span style="mso-spacerun: yes;">&nbsp; </span>However, the GLEIF states that ‘In a next step, the LEI data pool will be enhanced to include the ‘Level 2’ data that will answer the question of ‘who owns whom’’.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Will the LEI prove to be ‘the one ID number to rule them all’ and remove the need for trustees to keep providing KYC every time they embark on a new relationship with a financial institution?<span style="mso-spacerun: yes;">&nbsp; </span>Only time with tell.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-45803969177652776922017-03-23T07:58:00.003+00:002017-03-23T07:58:45.673+00:00Ilott v Mitson Supreme Court decision: UK testamentary freedom reasserted <br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Last week, the Supreme Court brought to an end a 13 year legal battle over the late Mrs Jackson’s Will.<span style="mso-spacerun: yes;">&nbsp; </span>The Will left virtually all of Mrs Jackson’s assets (some £480,000) to three UK charities, cutting out entirely her only child (Mrs Ilott), who was for many years estranged from her mother but who lived in very financially straitened circumstances with her husband and five children.</span><a name='more'></a> <br /> <br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Mrs Ilott brought a claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975.<span style="mso-spacerun: yes;">&nbsp; </span>That Act allows certain categories of applicants to apply for reasonable financial provision from a deceased UK domiciliary’s estate.<span style="mso-spacerun: yes;">&nbsp; </span>The potential applicants under the Act include a child of the deceased but reasonable financial provision is limited to ‘such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance’ (section1(2)(b)).<span style="mso-spacerun: yes;">&nbsp; </span>The District Judge, at first instance, awarded £50,000 out of the estate to Mrs Ilott, in satisfaction of her 1975 Act claim but, on appeal, the Court of Appeal awarded £163,000.<span style="mso-spacerun: yes;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The Supreme Court (per the judgment of Lord Hughes, with whom the rest of the Supreme Court Judges agreed) acknowledged that the 1975 Act impinges upon testamentary freedom in the UK.<span style="mso-spacerun: yes;">&nbsp; </span>However, the concept of testamentary freedom remains central to English law: </span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">‘<i style="mso-bidi-font-style: normal;">The law knows of no rule of automatic succession or forced heirship</i>’ (paragraph 1). </span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The decision also recognised that the long estrangement between the mother and daughter should be given due weight.<span style="mso-spacerun: yes;">&nbsp; </span>The 1975 Act states that, in determining whether the deceased’s Will or the intestacy rules (if there is no Will) make reasonable financial provision for the applicant under the Act, the court is obliged to have regard to a number of matters, including the financial resources and financial needs of the applicant, as well as those of the other beneficiaries.<span style="mso-spacerun: yes;">&nbsp; </span>The size and nature of the estate and ‘any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant’ (section 3(1)) are also taken into account.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The Supreme Court was critical of the Court of Appeal’s view that the long estrangement counted for little:</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">‘<i style="mso-bidi-font-style: normal;">It is not the case that once there is a qualified claimant and a demonstrated need for maintenance, the testator’s wishes cease to be of any weight.<span style="mso-spacerun: yes;">&nbsp; </span>They may of course be overridden, but they are part of the circumstances of the case and fall to be assessed in the round together with all the other relevant factors…it was not correct that so long and complete an estrangement was of little weight…care must be taken to avoid making awards under the 1975 Act primarily awards for good behaviour on the part of the claimant or penalties for bad on the part of the deceased</i>’ (paragraph 47).</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The court confirmed that the estrangement should limit the quantum of the award.</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The judgment also provides useful guidance on what maintenance means in practice.<span style="mso-spacerun: yes;">&nbsp; </span>It was noted that the concept of maintenance is broad but it should be taken to mean an amount to meet the everyday expenses of living – neither everything that would be desirable for the claimant to have but equally not limited to a subsistence level of living.<span style="mso-spacerun: yes;">&nbsp; </span>Reference was made, with approval, to a claim by a married adult son living in comfortable circumstances on a good income, whose claim to have his mortgage paid off was refused (<i style="mso-bidi-font-style: normal;">Re Jennings, deceased </i>[1994] Ch 286, per paragraph 14).<span style="mso-spacerun: yes;">&nbsp; </span>Equally, the court confirmed that necessitous circumstances are not, by themselves, always sufficient to justify a claim under the Act.<span style="mso-spacerun: yes;">&nbsp; </span>Maintenance should be regarded as the provision of an income, albeit that a capital sum could be awarded to provide the income stream.<span style="mso-spacerun: yes;">&nbsp; </span>If housing is needed to meet a claim for maintenance, the court noted that a life interest would usually be awarded in preference to a capital sum.<span style="mso-spacerun: yes;">&nbsp; </span>In Mrs Ilott’s case, many of her everyday living expenses were being met by her state benefits.<span style="mso-spacerun: yes;">&nbsp; </span>The £50,000 awarded was felt to be the correct amount to enable Mrs Ilott to purchase essential white goods, basic carpeting and curtains and replace worn out furniture in the family home.<span style="mso-spacerun: yes;">&nbsp; </span>These were regarded as necessities for daily living by the court and therefore meeting the requirement for maintenance.<span style="mso-spacerun: yes;">&nbsp; </span>If the £50,000 award was used in this way, Mrs Ilott’s capital would soon fall below £16,000 again, at which point her state benefits would restart.<span style="mso-spacerun: yes;">&nbsp; </span>The Court of Appeal’s decision to award a capital sum to enable Mrs Ilott to buy her home was rejected because her Housing Benefit was paying the bulk of her rent.</span></div><br /><div style="margin: 0cm 0cm 0pt; text-align: justify;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">The Supreme Court’s decision restores confidence in the will-making process.<span style="mso-spacerun: yes;">&nbsp; </span>It provides an invaluable road map for anyone tasked with advising a prospective will-maker whose Will provisions may prove controversial to their family and any financial dependants, as well as for consolers of disappointed children. </span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-14839340301692490942017-03-09T08:22:00.000+00:002017-03-09T08:22:04.758+00:00How to manage UK probate fee increases <br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Currently most applications made by solicitors for a UK grant of representation for a deceased’s estate incur a flat fee of £155 payable to the Probate Registry.<span style="mso-spacerun: yes;">&nbsp; </span>However, perhaps within a little over two months’ time, a grant could cost as much as £20,000!<span style="mso-spacerun: yes;">&nbsp; </span>How did we get here and, more importantly, what can be done about it?</span><a name='more'></a><br /> <br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The probate fee increases were first trialled in a Government consultation published on 18 February 2016 (further details in my 25 February 2016 blog </span><a href="http://wealthlawyeruk.blogspot.co.uk/2016/02/probate-fee-increases-death-tax-by-any.html"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;"><span style="color: blue;">here</span></span></a><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">) and, despite the vast majority of respondents disagreeing with the return to probate fees based on estate value, the Government is pressing ahead on the grounds that fee increases in the Probate Registry will help to ensure that the UK court system as a whole covers its costs.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The Government must first pass enabling legislation, but it is expected that applications for grants made from as early as May 2017 will be faced with these new charges, which scale the probate fee payable to the size of the estate, as follows:</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><table border="1" cellpadding="0" cellspacing="0" style="border-collapse: collapse; border-image: none; border: currentColor; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-table-layout-alt: fixed;"> <tbody><tr style="height: 14.2pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 14.2pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><b><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Value of estate (before Inheritance Tax) </span></span></b></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 14.2pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><b><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Proportion of all estates in England and Wales</span></span></b></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 14.2pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><b><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Proposed fee </span></span></b></div></td> </tr><tr style="height: 12.5pt; mso-yfti-irow: 1;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Up to £50,000 or exempt from requiring a grant of probate </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">58% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£0 </span></span></div></td> </tr><tr style="height: 12.5pt; mso-yfti-irow: 2;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Exceeds £50,000 but does not exceed £300,000 </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">23% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£300 </span></span></div></td> </tr><tr style="height: 12.5pt; mso-yfti-irow: 3;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Exceeds £300,000 but does not exceed £500,000 </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">11% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£1,000 </span></span></div></td> </tr><tr style="height: 12.6pt; mso-yfti-irow: 4;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Exceeds £500,000 but does not exceed £1m </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">6% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£4,000 </span></span></div></td> </tr><tr style="height: 12.5pt; mso-yfti-irow: 5;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Exceeds £1m but does not exceed £1.6m </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">1% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.5pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£8,000 </span></span></div></td> </tr><tr style="height: 12.6pt; mso-yfti-irow: 6;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Exceeds £1.6m but does not exceed £2m </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">0.3% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 12.6pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£12,000 </span></span></div></td> </tr><tr style="height: 6.2pt; mso-yfti-irow: 7; mso-yfti-lastrow: yes;"> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 6.2pt; padding: 0cm 5.4pt; width: 168.45pt;" valign="top" width="225"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">Above £2m </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 6.2pt; padding: 0cm 5.4pt; width: 177.15pt;" valign="top" width="236"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">0.5% </span></span></div></td> <td style="background-color: transparent; border-image: none; border: 0px rgb(0, 0, 0); height: 6.2pt; padding: 0cm 5.4pt; width: 4cm;" valign="top" width="151"> <div style="margin: 0cm 0cm 0pt;"><span style="font-size: 10.5pt;"><span style="font-family: Arial;">£20,000 </span></span></div></td> </tr></tbody></table><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The fee is based on the net real and personal estate passing under the grant.<span style="mso-spacerun: yes;">&nbsp; </span>Fortunately, therefore, life tenants of IPDIs (a form of Will-based trust) or pre 22 March 2006 interest in possession trusts do not have to worry that the aggregation of their personal assets with the value of the trust will increase their probate fee under the new scale.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Note that the date of death is immaterial; it is the date of the application for a grant that will govern whether the new fees apply.<span style="mso-spacerun: yes;">&nbsp; </span>The Probate Registry is gearing up for a marked influx of applications ahead of this change.</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Many estate administrations involve applying for a grant, particularly where assets are held in the deceased’s sole name.<span style="mso-spacerun: yes;">&nbsp; </span>Financial institutions usually want to see a grant unless the value of the deceased’s holding is relatively modest.<span style="mso-spacerun: yes;">&nbsp; </span>Anyone with an ISA of any value will need a grant for their estate as ISAs cannot be held in joint names.<span style="mso-spacerun: yes;">&nbsp; </span>Also the UK Land Registry will insist on sight of a grant if land is to be transferred from a deceased sole owner into the names of the personal representatives, or if personal representatives want to sell the deceased owner’s land or transfer it into the name of an heir.<span style="mso-spacerun: yes;">&nbsp; </span><a href="https://www.blogger.com/null" name="_CurrentPage"></a></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">These fee changes may encourage married couples to consider owning assets jointly so that, when the first death occurs, assets pass automatically to the surviving spouse by survivorship – no grant needed and therefore no probate fee incurred.<span style="mso-spacerun: yes;">&nbsp; </span>However, this may raise issues of control for some couples, or conflict with their tax planning, as they may want their share of jointly owned assets to pass into a will trust or ultimately to someone other than the surviving spouse after the first death. <span style="mso-spacerun: yes;">&nbsp;</span>Sometimes it may be acceptable for legal title to pass by survivorship to the surviving spouse and the beneficial interest to be held as tenants in common (i.e. as ‘divided shares’) but this may not provide sufficient protection for some couples and could still result in a grant being needed to deal with the beneficial interest.<span style="mso-spacerun: yes;">&nbsp; </span></span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">(For a good introduction to the differences between joint tenants and tenants in common ownership of UK property for co-owners, have a look at my colleague Joe Hobson’s article </span><a href="https://www.fladgate.com/2017/03/he-who-shares-wins-buying-residential-property/"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;"><span style="color: blue;">here</span></span></a><span style="font-size: 10.5pt;"><u><span style="color: blue; font-family: Arial;">.</span></u></span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">)</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">The threat of significant probate fees may also force some individuals or widow(er)s to consider making lifetime gifts of assets to their heirs (or face pressure from their heirs to do so).<span style="mso-spacerun: yes;">&nbsp; </span>If probate fees are based on the net value of the estate passing under the grant, deathbed gifts, even if they give rise to gifts with reservation of benefit for Inheritance Tax purposes, may become much more common.<span style="mso-spacerun: yes;">&nbsp; </span>Use of ‘probate bypass’ trusts is unlikely to prove popular as transferring assets into most types of trust could give rise to an immediate 20% Inheritance Tax entry charge.<span style="mso-spacerun: yes;">&nbsp; </span>Transferring assets into the joint names of the individual and their heir(s), so that the asset passes by survivorship, could be considered but this is fraught with difficulty.<span style="mso-spacerun: yes;">&nbsp; </span>Consider the example of a mother who decides to transfer her share portfolio into the joint names of herself and her son, who is to inherit the portfolio after her death.<span style="mso-spacerun: yes;">&nbsp; </span>Unless the equity ownership is documented very carefully, the mother could be regarded as making a disposal for Capital Gains Tax purposes and a gift for Inheritance Tax purposes.<span style="mso-spacerun: yes;">&nbsp; </span>Uncertainty may arise as to whether the mother or the son should pay tax on the portfolio’s dividends and gains.<span style="mso-spacerun: yes;">&nbsp; </span>Can the son be trusted not to deal with the portfolio contrary to his mother’s wishes?<span style="mso-spacerun: yes;">&nbsp; </span>Is the answer the same if the mother loses capacity?<span style="mso-spacerun: yes;">&nbsp; </span>If the son divorces, will his ex-wife accept that the son does not own at least 50% of the portfolio?<span style="mso-spacerun: yes;">&nbsp; </span>On the mother’s death, the arrangement is likely to come under some scrutiny, both by HMRC and also the other heirs of her estate.<span style="mso-spacerun: yes;">&nbsp; </span>Joint ownership should not be jumped into lightly, simply for the sake of saving probate fees.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">Executors of estates which need to submit an IHT400 account to HMRC – being estates in excess of £1m or in excess of the £325,000 nil rate band if no Inheritance Tax exemption or transferable nil rate band is being claimed – must get their skates on and submit an IHT400 without delay, if they do not want to be caught by the fee increases.<span style="mso-spacerun: yes;">&nbsp; </span>Usually these estates submit the IHT400 and wait for HMRC to return a stamped IHT421 to confirm all IHT falling due at that point has been paid before applying for the grant, as the stamped IHT421 must be submitted with the other grant application papers to the Probate Registry.<span style="mso-spacerun: yes;">&nbsp; </span>HMRC can take upwards of a month to issue these at present.<span style="mso-spacerun: yes;">&nbsp; </span>Executors may be in the difficult position of facing not only penalties if they submit an incorrect IHT return, but also unhappy beneficiaries if they miss the (as yet unknown) fee increase deadline.<span style="mso-spacerun: yes;">&nbsp; </span>In a press release earlier this week though, the Probate Registry confirmed that it is possible to submit the IHT400 to HMRC and make the grant application to the Probate Registry simultaneously, provided the probate application is marked to say that this has been done.</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-size: 10.5pt;">NB: Do not be fooled by reference to ‘probate fees’ in the Government’s consultation documents.<span style="mso-spacerun: yes;">&nbsp; </span>A grant of probate is issued where a person dies having made a Will but intestate estates (for which a grant of letters of administration is usually made) will be liable for the fee increases as well.<span style="mso-spacerun: yes;">&nbsp; </span>There is still no excuse for dying without a Will!</span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-57259041716280923052017-02-23T07:58:00.004+00:002017-02-23T07:58:48.144+00:00A simple way for non-dom married couples to manage the Inheritance Tax on UK residential property from 6 April 2017 <br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Offshore companies holding UK residential property will no longer be opaque for UK Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>) purposes from 6 April 2017.<span style="mso-spacerun: yes;">&nbsp; </span>The change is being achieved, courtesy of the Finance Bill 2017 as currently drafted, by removing IHT ‘excluded property’ status from an interest in a closely held company (see the 15 December 2016 blog for a brief definition) which derives its value, directly or indirectly, from UK residential property.<span style="mso-spacerun: yes;">&nbsp;</span></span><a name='more'></a><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">In plain English, that means that anyone owning a right or interest in such a company will have an asset that will be taxable to 40% IHT if the person owns that interest on death.<span style="mso-spacerun: yes;">&nbsp; </span>The same situation applies if instead the person is a partner in a partnership invested in UK residential property.</span><br /> <br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">From the introduction of the Annual Tax on Enveloped Dwellings (<b style="mso-bidi-font-weight: normal;">ATED</b>) in 2013, using a company to hold a UK residential property came with an annual ATED tax bill, if the property was simply used as a family residence, but as the company structure prevented the UK property from being exposed to IHT, this was an annual price that many non-UK domiciled families were willing to consider paying.<span style="mso-spacerun: yes;">&nbsp; </span>However, now that the IHT protection of the company is being lost, as a result of the Finance Bill 2017 changes, a key reason for keeping a UK residential property in an offshore corporate structure is about to be lost.<span style="mso-spacerun: yes;">&nbsp; </span>Not surprisingly, therefore, removing the residential property from the corporate structure into personal ownership is becoming more prevalent.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">For many non-domiciled families with UK residential property interests, this will be their first brush with IHT.<span style="mso-spacerun: yes;">&nbsp; </span>Two key planning points will be of interest to non-dom families faced with this new predicament.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Firstly, a tax deferred is potentially a tax mitigated.<span style="mso-spacerun: yes;">&nbsp; </span>Married couples jointly owning UK residential property in their personal capacities should ensure that they make UK Wills leaving their UK residential property outright to each other on death or, if that is not desired, in a certain sort of trust written into the Will instead, which gives the surviving spouse a life interest in the property.<span style="mso-spacerun: yes;">&nbsp; </span>If a Sharia compliant distribution will be required on death, a suitably flexible life interest will trust may still offer an acceptable solution.<span style="mso-spacerun: yes;">&nbsp; </span>Structuring matters this way will ensure that, on the death of the first spouse, their interest in the UK property will attract the benefit of the generous, 100% IHT spouse exemption, so that no IHT will be payable on the first spouse’s death.<span style="mso-spacerun: yes;">&nbsp; </span>The deferral will give the surviving spouse the opportunity to sell the UK residential property and take the sale proceeds out of the UK before the surviving spouse’s death.<span style="mso-spacerun: yes;">&nbsp; </span>As long as the survivor does not own UK residential property at their death, there will be no IHT provided the sale proceeds are abroad.<span style="mso-spacerun: yes;">&nbsp; </span>For some families, this simple estate plan will suffice.<span style="mso-spacerun: yes;">&nbsp; </span>In short, making a UK Will in the correct format secures a complete IHT exemption for non-dom married couples on the first death.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">If the corporate structure owning the UK residential property interest is to be retained notwithstanding these changes, the owner of the interest in the company should ensure that their interest is left to their spouse in a way that attracts the IHT spouse exemption.<span style="mso-spacerun: yes;">&nbsp; </span>As the company will invariably be a non-UK company, advice should be sought in the jurisdiction in which the company is registered as to whether making a Will in that jurisdiction will be the best means of transferring the interest in the company to the surviving spouse on death.<span style="mso-spacerun: yes;">&nbsp; </span>An English tax adviser can confirm whether the terms of any foreign Will will secure the IHT spouse exemption.</span></div><br /><div style="margin: 0cm 0cm 10pt; text-align: justify;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Secondly - be wary of the potential IHT consequences of lifetime gifts of personally held UK residential property.<span style="mso-spacerun: yes;">&nbsp; </span>The IHT legislation prevents lifetime gifts of assets being effective for IHT purposes if, at any later stage, the gifted property is not enjoyed to the virtue entire exclusion of the giver.<span style="mso-spacerun: yes;">&nbsp; </span>These are referred to as gifts with reservation of benefit.<span style="mso-spacerun: yes;">&nbsp; </span>According to HMRC, that means that if parents give their occasional London residence to, say, their children and continue to occupy that residence in the absence of the children for more than two weeks each year thereafter, the residence will still be taxed to IHT on a parent’s death, even if the parent had made a Will in the format above.<span style="mso-spacerun: yes;">&nbsp; </span>There are a couple of statutory let outs to the reservation of benefit rules for gifts involving residences but, in general, gifts with reservation of benefit are to be avoided at all costs. </span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-87551868915262144212017-02-09T08:04:00.000+00:002017-02-09T08:04:51.276+00:00Finance Bill 2017 tax changes: how can UK resident non-doms protect their offshore trusts? <br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">To date, UK resident non-doms may not have been greatly impacted by the UK tax system’s plethora of measures to try to get the foreign income and gains received by offshore trusts (i.e. trusts that are not UK tax resident) taxed in the UK.&nbsp; This is because one of the key anti-avoidance provisions, the ‘S.86 Settlor Charge’ which can make a trust’s settlor liable for the offshore trust’s gains, only applies to settlors who are both resident and domiciled in the UK.</span><a name='more'></a><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">Its sister charge, the ‘S.87 Beneficiary Charge’, can apply to match trust gains with distributions and benefits (‘capital payments’) to the trust’s beneficiaries.<span style="mso-spacerun: yes;">&nbsp; </span>This will not trouble a UK resident non-dom beneficiary either, provided the capital payments are made or enjoyed outside the UK, and kept there, and the resident non-dom claims the remittance basis of taxation.&nbsp; </span><br /> <br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">Similarly, the Settlement regime and the Transfer of Assets Abroad provisions in the current Income Tax legislation can also tax foreign trust income on settlors. These are manageable if the settlor is claiming the remittance basis of taxation and capital payments are not remitted to the UK.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">However, long term UK resident non-doms could find that, unless they move quickly, the taxation of their offshore trusts, as they currently know it, changes for them from 6 April 2017.&nbsp; Based on the current draft Finance Bill 2017, those non-doms resident in the UK for 15 or more out of the 20 income tax years, ending with the tax year prior to the one in question (so for tax year 2017/2018, starting 6 April 2017, the 20 years is up to and including tax year 2016/2017), will be deemed to be UK domiciled for Income Tax and Capital Gains Tax purposes.&nbsp; In other words, access to the remittance basis of taxation is to have a time limit placed upon it – a maximum of 15 years for those individuals here for a continuous period of 15 tax years.&nbsp; </span></div><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;"><br /></span></div><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">Stripped of the remittance basis of taxation, UK resident deemed dom settlors could feel the full force of S.86 and be taxed on trust gains as they arise.&nbsp; Under new rules contained in the Finance Bill, capital payments to close family members will also be taxed on a UK resident settlor (this will apply to all UK resident settlors, be they non-dom or deemed dom, from 6 April 2017) if they are not liable for UK tax on the close family member (because the family member is a remittance basis user, for example).<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">The picture is not so gloomy for trust income.&nbsp;&nbsp; Draft legislation just published confirms that foreign trust income will only be taxed on UK resident settlors if they or close family members actually receive a benefit from the trust (as for gains).&nbsp; UK resident settlors will no longer automatically be taxed on foreign trust income simply because they are also a potential beneficiary of the offshore trust.<span style="mso-spacerun: yes;">&nbsp; </span><a href="https://www.blogger.com/null" name="_CurrentPage"></a></span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">So does this mean that soon to be deemed doms should abandon their offshore trusts?&nbsp; Far from it.&nbsp; Offshore trusts continue to offer a shelter from UK Inheritance Tax for assets placed into them before the settlor becomes UK domiciled, deemed or actual.&nbsp; And, going forward, settlors and their close family members who can leave capital and income in the trust without taking a benefit will still find that foreign income and gains can be rolled up in an offshore trust free of UK Income Tax and Capital Gains Tax, provided that the offshore trust meets the criteria for the new status of ‘protected trust’ offered in the Finance Bill 2017.&nbsp;&nbsp; This requires there to be no capital or income additions to the trust by the settlor or another trust of which the settlor is a beneficiary or the settlor of that trust. </span></div><br /><div style="margin: 0cm 0cm 0pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;">&nbsp;</span></div><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">Any non-dom UK resident settlors about to become deemed domiciled should get their offshore trusts screened now, to identify potential sources of additions.&nbsp; Apart from a few exceptions, any addition, of however much and even if inadvertent, from 6 April 2017, will mean that the protected status is lost for good and the offshore trust’s income and gains are then assessed on the UK resident deemed dom settlor as they arise.&nbsp; The stakes could be high.&nbsp;</span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-18554309176757575942017-01-26T08:09:00.001+00:002017-01-26T08:09:20.631+00:00Long term UK resident non-doms to be deemed UK domiciled <br /><div style="margin: 6pt 0cm; text-align: justify;"><span style="font-family: Arial;">The UK Government has released draft legislation giving effect to its proposal to deem the domicile status of certain UK resident non-doms to be UK domiciled, regardless of their actual domicile.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The changes only apply to non-doms who, on or after 6 April 2017, have been tax resident in the UK for 15 out of the previous 20 tax years.&nbsp;&nbsp; For example, in tax year 2017/2018 beginning on 6 April 2017, the changes would only affect any individual who has been resident in the UK continuously since UK tax year 2002/2003 or earlier.&nbsp; These non-doms will be deemed to be UK domiciled. </span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Becoming deemed UK domiciled has a number of implications for UK taxes.</span><a name='more'></a><span style="font-family: Arial;">The main implications for personally held assets are:</span><br /> <br /><div style="margin: 6pt 0cm;"><i><span style="font-family: Arial;">Loss of access to the remittance basis of taxation</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The remittance basis is a favourable system of taxation allowing foreign income and gains to remain outside the scope of UK tax unless remitted to the UK.&nbsp; Currently any non-dom, no matter how many years resident in the UK, can claim this basis of taxation, although some have to pay a charge for it.&nbsp; From 6 April 2017, deemed domiciled individuals cannot access the remittance basis of taxation and will be liable to UK Income Tax (<b style="mso-bidi-font-weight: normal;">IT</b>) and Capital Gains Tax (<b style="mso-bidi-font-weight: normal;">CGT</b>) on their worldwide income and gains in the year in which they arise.</span></div><br /><div style="margin: 6pt 0cm;"><i><span style="font-family: Arial;">Exposure to Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>)</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Personally held assets wherever situated in the world will be exposed to IHT at 40% on death.&nbsp; All other aspects of the IHT regime, including the need to survive lifetime gifts by seven years and not to retain benefits in gifts in order to make effective gifts for IHT purposes, will apply to worldwide assets.</span></div><br /><div style="margin: 6pt 0cm;"><b><span style="font-family: Arial;">Rebasing opportunity: for long term resident non-doms only</span></b></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The previously trailed rebasing opportunity will allow inherent gains in assets as at 6 April 2017 to be wiped so that, on a subsequent disposal whilst deemed UK domiciled, a non-dom individual will not suffer CGT on the pre 6 April 2017 element of the gain.&nbsp; The qualifying criteria have slightly altered and are now the following:</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo1;">The asset disposed of simply needs to be a personally held non-UK situated asset (or if it has been a UK situated asset in the past, it ceased to be so from 16 March 2016 until 5 April 2017).&nbsp; The previous requirement to have held the asset on a certain date in 2015 has been dropped.&nbsp; It remains the case, however, that rebasing is not available for assets held in trust and only if the disposal of the asset will give rise to gains taxable to CGT, as opposed to IT (so beware offshore income gains).</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">The individual must become deemed domiciled on 6 April 2017.&nbsp; Unfortunately if an individual becomes deemed domiciled in a later tax year, rebasing is not available so re-examine the residency status of individual tax years if necessary, to see if more tax residency years can be found if needed.</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">The Remittance Basis Charge (<b style="mso-bidi-font-weight: normal;">RBC</b>) must have been paid for at least one tax year.&nbsp; Claiming the remittance basis is insufficient on its own.&nbsp; It may be possible to amend a return for a previous tax year in order to claim the remittance basis of taxation if necessary.</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">It will be necessary to elect out of rebasing, on an asset by asset basis.&nbsp; Rebasing will be automatic on assets that qualify but an election out will allow losses to be claimed and utilised.</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 6pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">The individual must not be a ‘formerly domiciled resident’, meaning someone born in the UK with a UK domicile of origin.&nbsp; </div></li></ul><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Non-doms will still need to think carefully about how the non-gain element of the non-UK asset will be taxed on disposal, if some or all of the proceeds of sale are to be brought into the UK.&nbsp; This is where the mixed fund cleansing opportunity (explained below) may help to prevent so-called mixed funds being brought to the UK after the asset is disposed of, with the punitive UK tax consequences that usually follow.</span></div><br /><div style="margin: 6pt 0cm 0pt; mso-add-space: auto;"><b><span style="font-family: Arial;">Mixed fund cleansing opportunity: for all non-doms</span></b></div><br /><div style="margin: 12pt 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">All resident non-doms can bring funds untainted with any foreign income and gains which have arisen in a period of UK residency (called ‘clean capital’) to the UK without having to worry about having to pay UK tax on them.&nbsp; Accordingly clean capital is a precious commodity.&nbsp; The mixed fund cleansing opportunity allows non-doms already resident here to create more clean capital to bring into the UK – a tempting prospect if the supply of clean capital to cover UK living expenses could run out before the non-dom is ready to leave the UK and cease residency.</span></div><br /><div style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">The good news is that the opportunity is open for a year longer than previously announced.&nbsp; It will run from 6 April 2017 to 5 April 2019.&nbsp; </span></div><br /><div style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">In contrast to rebasing, there is no requirement to become deemed domiciled on 6 April 2017 and no requirement to have paid the RBC; just to have claimed the remittance basis. </span></div><br /><div style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span style="font-family: Arial;">&nbsp;</span></div><br /><div style="margin: 0cm 0cm 6pt; mso-add-space: auto;"><span style="font-family: Arial;">The quid pro quo for this generosity is that it will only apply to cash in non-UK bank accounts, so to create clean capital from non-cash assets, they will have to be liquidated and it must be possible to identify the different elements of the proceeds, so that if the asset was purchased from clean capital, the original clean capital corpus must be readily distinguishable from subsequent foreign income and gains, especially if these were reinvested or commingled with the original clean capital. </span></div><br /><div style="margin: 6pt 0cm;"><b><span style="font-family: Arial;">Heading for the exit?</span></b></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">If a non-dom individual is currently non-UK resident or will be so before 6 April 2017 but, due to recent UK residency, would satisfy the new 15/20 year test on 6 April 2017, the changes will not apply to them if they maintain their non-UK residency.</span></div><br /><div style="margin: 6pt 0cm 0pt;"><span style="font-family: Arial;">However, anyone who will be deemed UK domiciled from 6 April 2017 and then leaves the UK would have to stay non-UK resident for six complete UK tax years before being able to return to the UK with a re-set clock and start claiming the remittance basis of taxation again.&nbsp; At least ceasing UK residency would allow foreign income and gains to be enjoyed free of IT and CGT again immediately though, as exposure to these taxes requires residency.&nbsp; The new legislation imposes a different rule for IHT – only three complete tax years of non-UK residency will be required to lose deemed domicile status for IHT purposes but in this period, exposure to IHT on worldwide assets will continue as IHT exposure only requires a UK domicile; UK residency status is not also a requirement.</span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-54522238374331737342017-01-12T09:37:00.002+00:002017-01-12T09:37:25.592+00:00‘Toxic’ survivorship clauses: does your Will contain one? <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Do you have a survivorship clause in your Will?<span style="mso-spacerun: yes;">&nbsp; </span>Chances are you do, if you leave assets to someone outright in your Will.<span style="mso-spacerun: yes;">&nbsp; </span>The mischief that these clauses are designed to avoid is this.<span style="mso-spacerun: yes;">&nbsp; </span>If A gives a gift to B in his Will and B dies the day after A, B’s estate will get the gift and it will be B’s Will that decides where A’s gift ends up.<span style="mso-spacerun: yes;">&nbsp; </span>However, in these circumstances, A may have wanted someone else to get the gift instead (A may not like B’s choice of heirs!).<span style="mso-spacerun: yes;">&nbsp; </span>Survivorship clauses are meant to solve this problem.<span style="mso-spacerun: yes;">&nbsp; </span>They also prevent the delay associated with the same money being administered through two separate estates and can reduce the total Inheritance Tax bill on both estates.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Survivorship clauses introduce a condition of survivorship to an otherwise outright gift in a Will – for example: ‘I give £100,000 to my nephew if he survives my death by 28 days’.<span style="mso-spacerun: yes;">&nbsp; </span>Sometimes a catch-all survivorship clause is included instead; for example: ‘My estate is to be divided as if any person who dies within 28 days of my death had predeceased me’.<span style="mso-spacerun: yes;">&nbsp; </span>However, this exact catch-all phrase unfortunately caught out the estates of the late Mr and Mrs Winson, as recently decided in the case of <i style="mso-bidi-font-style: normal;">Jump </i>v<i style="mso-bidi-font-style: normal;"> Lister</i> [2016] EWHC 2160 (Ch).</span><a name='more'></a><br /> <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Mr and Mrs Winson made similar Wills leaving everything to each other but if that gift failed, each Will contained a near identical list of cash gifts to be made, totalling £214,500 in each Will, and the rest to two nieces.<span style="mso-spacerun: yes;">&nbsp; </span>Their Wills contained the above survivorship catch-all clause.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Unfortunately, Mr and Mrs Winson died of natural causes at home and, as it was impossible to say which survived the other, English law (specifically the commorientes rule in section 184 Law of Property Act 1925, which is designed to help determine ownership of assets where survivorship is uncertain) stepped in to deem the younger (Mr Winson) to have died last. Therefore, in Mrs Winson’s case, her husband was deemed to survive her because he was younger but not by 28 days and so the gift to him failed.<span style="mso-spacerun: yes;">&nbsp; </span>In Mr Winson’s case, his wife as the elder was deemed to have already predeceased him and so the gift to her automatically failed.<span style="mso-spacerun: yes;">&nbsp; </span>The result was that the recipients of the cash gifts received the same gift twice, from each Will.<span style="mso-spacerun: yes;">&nbsp; </span>As there was no ambiguity in the wording of the survivorship clause, the court felt unable to reach any other conclusion.<span style="mso-spacerun: yes;">&nbsp; </span>Whilst Mr Winson had asked for confirmation from the solicitor draftsman that the legacies would not be paid twice, Mrs Winson had not. <span style="mso-spacerun: yes;">&nbsp;</span>Therefore there was insufficient evidence of her intentions on the matter to found a claim for rectification of her Will, to prevent the cash gifts being made twice. </span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Not all survivorship clauses are ‘toxic’ but in this case, a combination of unusual circumstances and a lack of appreciation about how the commorientes rule would operate on the survivorship clause in the Will resulted in unintended consequences.<span style="mso-spacerun: yes;">&nbsp; </span>The survivorship clause should have been disapplied in respect of the gift to the spouse in the Winsons’ Wills.<span style="mso-spacerun: yes;">&nbsp; </span>The case shows that it’s wise to get the will-drafter to focus on the issue by confirming in writing how the survivorship clause </span><a href="https://www.blogger.com/null" name="_CurrentPage"></a><span style="font-family: Arial;">could operate.<span style="mso-spacerun: yes;">&nbsp; </span>The case is also a clear reminder that Will drafting is a tricky business.<span style="mso-spacerun: yes;">&nbsp; </span>Mr and Mrs Winson could not have spotted the issue even by reading their Wills carefully.<span style="mso-spacerun: yes;">&nbsp; </span>No one who was unaware of the commorientes rule would have either.</span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-37765045459183967902016-12-15T08:02:00.000+00:002016-12-15T08:05:15.772+00:00UK residential property in offshore structures: more surprises from the Government<br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">The Government has confirmed its intention to make UK residential property held indirectly by non-doms through an offshore structure chargeable to UK Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>).<span style="mso-spacerun: yes;">&nbsp; </span>As planned, this will begin on 6 April 2017.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">Although the proposal was first announced as far back as July 2015, draft legislation effecting this change was only published on 5 December 2016 – and it contains some surprises.</span><br /><a name='more'></a><span style="font-family: &quot;arial&quot;;"><span style="background-color: white;"></span></span><b style="mso-bidi-font-weight: normal;"><span style="font-family: &quot;arial&quot;;">Main features of the draft legislation</span></b><br /><br /><div style="margin: 6pt 0cm;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot;;">Affected structures clarified</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">Owners of interests in partnerships and closely held companies whose value is derived, directly or indirectly, from UK residential property, are the key targets.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">A close company broadly means one owned by five or fewer participators (essentially anyone who has an interest in the company, not just shareholders), or owned only by directors, who together control the company.</span></div><br /><div style="margin: 6pt 0cm;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot;;">Debt in the structure</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">The Government’s 18 August Consultation envisaged that debt funding provided by connected parties would be ignored when valuing an interest for the purposes of these changes.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">This proposal has been shelved.<span style="mso-spacerun: yes;">&nbsp; </span>Instead, any person providing a loan, or offering money or money’s worth by way of security, collateral or guarantee, to an individual, a partnership or a trust where the funds are used to finance the acquisition, maintenance or enhancement of UK residential property will be treated as having an asset that is within the charge to IHT.<span style="mso-spacerun: yes;">&nbsp; </span>Funds used to invest in close companies or partnerships who carry out the acquisition etc. instead are also caught.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">However, any such loan can be deducted (unless otherwise disallowed under existing IHT legislation) when valuing the close company or partnership interest.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">It does not matter when the loan or collateral etc. was provided, making this element of the legislation retrospective.<span style="mso-spacerun: yes;">&nbsp; </span>The entire value of the collateral or guarantee will be subject to IHT, regardless of the value of the UK residential property that it relates to.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">If the close company has liabilities and owns a number of assets, in addition to UK residential property, the liabilities are to be attributed to all the property rateably (regardless of the actual position).<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot;;">Two year tail</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">After 6 April 2017, for owners of qualifying company or partnership interests or who have lent funds or provided collateral or a guarantee, IHT exposure will continue for two years after ownership of the qualifying interest or the other arrangement ceases.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot;;">Secondary IHT liability for company directors dropped</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">The Government had planned to make directors of affected close companies liable in certain situations to any IHT that may arise under the new rules, if the company was the legal owner of the UK residential property.<span style="mso-spacerun: yes;">&nbsp; </span>However in the Autumn Statement, the Government announced that it would consider alternative approaches to enforcement.</span></div><br /><div style="margin: 6pt 0cm;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;arial&quot;;">New TAAR</span></i></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">A widely worded Targeted Anti-Avoidance Rule will apply to counteract any arrangements whose purpose, or main purpose, is to secure a tax advantage by avoiding or minimising the effects of the new look-through rules.</span></div><br /><div style="margin: 6pt 0cm;"><b style="mso-bidi-font-weight: normal;"><span style="font-family: &quot;arial&quot;;">Planning points</span></b></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">The changes will be of concern to individual owners of close company and partnership interests, and trustees, who must now get to grips with the IHT relevant property regime and its periodic charges to IHT.<span style="mso-spacerun: yes;">&nbsp; </span>Here are some points for consideration:</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo1;">As the definition of a participator in a close company is very wide, it may be worth checking whether all companies within the structure are really closely held.<span style="mso-spacerun: yes;">&nbsp; </span>Ownership of UK residential property through unit trusts or widely held companies will act as a block against these provisions.<span style="mso-spacerun: yes;">&nbsp; </span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">The proposed two year tail provides another major incentive to de-envelope before 6 April 2017 for those who have decided that it is the right course of action for them.<span style="mso-spacerun: yes;">&nbsp; </span>The Government confirmed in its consultation response that no de-envelopment relief will be provided. </div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">Structures must now be reviewed for the existence of loans, security, collateral or guarantees so that the IHT implications for the providers of those assets can be assessed and consideration given to changing the finance structure if possible and desirable.</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">If a close company with liabilities contains a mixture of assets including UK residential property, consider moving the non-UK residential property out of the company so that the value of the close company shares under the new IHT rules will be reduced by the liabilities as much as possible.<span style="mso-spacerun: yes;">&nbsp; </span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 6pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">The introduction of the TAAR will make contrived avoidance of the new rules risky.<span style="mso-spacerun: yes;">&nbsp; </span>The difficulty will be determining when the line is crossed. </div></li></ul><br /><div style="margin: 6pt 0cm;"><span style="font-family: &quot;arial&quot;;">The final version of the legislation will be subject to confirmation at Budget 2017, for which no date has been announced as yet but which is likely to take place in</span><a href="https://www.blogger.com/null" name="_CurrentPage"></a><span style="font-family: &quot;arial&quot;;"> mid-March 2017.<span style="mso-spacerun: yes;">&nbsp; </span></span><br /><span style="font-family: Arial;"><br /></span><br /><span style="font-family: Arial;"><em><span style="font-size: x-small;">Happy Christmas to all my readers around the world!&nbsp; Next post: Thursday 12 January 2017</span></em>&nbsp; </span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-9725128845155550092016-12-01T10:17:00.004+00:002016-12-01T10:17:34.300+00:00Get ready for another ATED valuation date <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The Autumn Statement on 23 November contained no further detail about how the Government’s proposals for achieving Inheritance Tax transparency for offshore structures from 6 April 2017 is going to work in practice.<span style="mso-spacerun: yes;">&nbsp; </span>However, in rather ominous fashion, the Government did use the occasion to confirm that the changes are going ahead as planned from 6 April 2017.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Non-doms owning UK residential property through offshore trusts, companies or other vehicles need to get their skates on if they are to get any reorganisations finished by 6 April 2017 (see my blog of 3 November 2016 for one reason why doing so may be desirable).<span style="mso-spacerun: yes;">&nbsp; </span>However, there may be another good reason – some may find their company’s Annual Tax on Enveloped Dwellings (<b style="mso-bidi-font-weight: normal;">ATED</b>) bill goes up substantially too.<span style="mso-spacerun: yes;">&nbsp; </span>Here’s why.</span><a name='more'></a><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">1 April 2017 is another ‘Valuation Day’ for ATED purposes.<span style="mso-spacerun: yes;">&nbsp; </span>A Valuation Day affects how much ATED a company pays.<span style="mso-spacerun: yes;">&nbsp; </span>At its simplest, ATED is payable if a non-natural person (be they UK based or offshore) beneficially owns a single dwelling interest with a taxable value of (currently) more than £500,000.<span style="mso-spacerun: yes;">&nbsp; </span>The amount of ATED that, say, a company pays is based on the taxable value of the single dwelling interest, which is calculated with reference to the open market value of the property on the most recent valuation date.<span style="mso-spacerun: yes;">&nbsp; </span>The ATED legislation provides for five year intervals between valuation dates (with separate rules for properties acquired in between valuation dates).<span style="mso-spacerun: yes;">&nbsp; </span>The first valuation date was 1 April 2012 and the next is 1 April 2017. </span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Many companies may have only started to pay ATED in 2015 and 2016 because the property that they may have owned for many years prior to 1 April 2012 was, on that date, only worth between £1,000,001 and £2,000,000 (for ATED 2015/2016) or £500,001 and £1,000,000 (for ATED 2016/2017).<span style="mso-spacerun: yes;">&nbsp; </span>The ATED threshold value dropped to between £1,000,001 and £2,000,000 for the first time in ATED tax year 2015/2016 and to the lower band in ATED tax year 2016/2017.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The Autumn Statement confirmed that the ATED rates for 2017/2018 will rise in line with inflation.<span style="mso-spacerun: yes;">&nbsp; </span>However, for those companies who find that, in the last five years, their property has jumped into the next ATED valuation bracket, the increase will be much more substantial, particularly if moving between some of the higher brackets, as this table of 2016/2017 ATED tax year rates shows:</span></div><br /><div style="margin: 0cm 0cm 10pt;"><b><span lang="EN" style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN;">Chargeable amounts for 1 April 2016 to 31 March 2017</span></b></div><br /><table border="0" cellpadding="0" style="mso-cellspacing: 1.5pt; mso-yfti-tbllook: 1184;"> <thead><tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><b><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Property value</span></b></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><b><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Annual charge</span></b></div></td> </tr></thead> <tbody><tr style="mso-yfti-irow: 1;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £500,000 but not more than £1 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£3,500</span></div></td> </tr><tr style="mso-yfti-irow: 2;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £1 million but not more than £2 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£7,000</span></div></td> </tr><tr style="mso-yfti-irow: 3;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £2 million but not more than £5 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£23,350</span></div></td> </tr><tr style="mso-yfti-irow: 4;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £5 million but not more than £10 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£54,450</span></div></td> </tr><tr style="mso-yfti-irow: 5;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £10 million but not more than £20 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£109,050</span></div></td> </tr><tr style="mso-yfti-irow: 6; mso-yfti-lastrow: yes;"> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">More than £20 million</span></div></td> <td style="background-color: transparent; border-image: none; border: rgb(0, 0, 0); padding: 0.75pt;"> <div align="right" style="margin: 0cm 0cm 10pt; text-align: right;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">£218,200</span></div></td> </tr></tbody></table><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">(</span><span lang="EN-US"><a href="http://www.gov.uk/"><span lang="EN-GB" style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;"><span style="color: blue;">www.gov.uk</span></span></a></span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">: Crown copyright</span><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">)</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">For example, a company owning a property worth £1,700,000 on 1 April 2012 will have had to pay £7,000 of ATED for the last two ATED tax years only but if the property has risen in value to £2,100,000 by 1 April 2017, the company will be expected to find £23,350 per annum instead (using current tax year’s rates).<span style="mso-spacerun: yes;">&nbsp; </span>That will put the Government’s planned inflationary increases in the shade! </span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The Government says that the 2017 Valuation Date will affect ATED tax calculations in 2018/2019 onwards.<span style="mso-spacerun: yes;">&nbsp; </span>This means that there should be no rush to get 1 April 2017 valuations done in time for the 30 April 2017 deadline for the next payment of ATED.<span style="mso-spacerun: yes;">&nbsp; </span>However, the year’s delay may lull some into a false sense of security.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">The new ATED valuation date and the expense involved in getting another valuation done are additional factors to throw into the mix when working out whether it is worthwhile keeping UK residential property ‘enveloped’ in an offshore structure after 5 April 2017. </span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-27196301071704935822016-11-17T08:14:00.002+00:002016-11-17T08:14:26.656+00:00Appointing joint attorneys? Here’s a welcome clarification of the law <br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Lasting Powers of Attorney are an essential wealth management tool for anyone who directly holds UK assets and can name at least someone whom they trust to take decisions on their behalf.<span style="mso-spacerun: yes;">&nbsp; </span>They are often made by individuals concerned about who would continue to make decisions about their finances or their health and welfare if they ever lost capacity to do so themselves.<span style="mso-spacerun: yes;">&nbsp; </span>They are increasingly popular – registrations of Lasting Powers topped 533,000 in the year to end March 2016; a 35% increase from the previous year.<span style="mso-spacerun: yes;">&nbsp; </span>The increasing number of registrations indicates that there are more Lasting Powers in circulation.<span style="mso-spacerun: yes;">&nbsp; </span></span><a href="https://www.blogger.com/null" name="_CurrentPage"></a></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">Many clients want to appoint more than one attorney.<span style="mso-spacerun: yes;">&nbsp; </span>The Lasting Power of Attorney legislation permits the appointment of both attorneys and replacement attorneys, the latter acting as substitutes.<span style="mso-spacerun: yes;">&nbsp; </span>Joint attorneyships are not uncommon.<span style="mso-spacerun: yes;">&nbsp; </span>Take the situation of an individual – James – who wants to appoint his wife Amy and his brother Bill as his attorneys, to act jointly in relation to his finances.<span style="mso-spacerun: yes;">&nbsp; </span>His lawyer tells him that it would be prudent to name a replacement attorney too and he chooses his son Christopher.<span style="mso-spacerun: yes;">&nbsp; </span>But his son is still in his twenties and, if either Amy or Bill or both were able to act, he would like them to do so in preference to Christopher.&nbsp; <span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">This simple sounding request has had English law in knots for a while.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></span></span><a name='more'></a><br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">English law assumes that, by appointing Amy and Bill jointly, James is saying that if Amy predeceases him, it doesn’t mean that he wants Bill to act alone.<span style="mso-spacerun: yes;">&nbsp; </span>In other words, James is appointing Amy and Bill as a unit – if he can’t have both of them acting, neither of them should.<span style="mso-spacerun: yes;">&nbsp; </span>Often this is not what clients like James want and, fortunately, a recent case in the High Court (<i style="mso-bidi-font-style: normal;">Miles</i> v <i style="mso-bidi-font-style: normal;">The Public Guardian and Others</i> [2015] EWHC 2960 (Ch)) has confirmed that James can have what he wants – but only if he words his Lasting Power correctly. </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">The Miles case involved a ‘hybrid power’.<span style="mso-spacerun: yes;">&nbsp; </span>Mrs Miles wanted her attorneys A and B to act jointly in relation to her home and transactions with a value in excess of £10,000.<span style="mso-spacerun: yes;">&nbsp; </span>Otherwise she was happy for A and B to act jointly and severally.<span style="mso-spacerun: yes;">&nbsp; </span>She only wanted her replacement attorney C to step in if both A and B couldn’t act.<span style="mso-spacerun: yes;">&nbsp; </span>The court approved the following wording:</span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">"I wish my attorneys A and B to act as follows:</span></span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">(1) So long as both attorneys are able and willing to act, I wish them to make the following decisions jointly: sale of the house; transactions over £10,000 [or the like] but all other decisions to be made jointly and severally;</span></span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">(2) In the event that one of my original attorneys A and B is unable or unwilling to act, I then appoint the remaining of my original attorneys A or B, as the case may be, as replacement attorney to act solely;</span></span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">(3) In the event of both my original attorneys being unable or unwilling to act, I appoint C as a replacement attorney to act solely [with whatever variations the case requires]."</span></span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="mso-ansi-language: EN-GB;"><span style="font-family: Calibri;">James can take comfort from this case because it provides authority (at paragraph 19) for him to appoint Amy and Bill jointly in relation to all decisions and state specifically that if either of them is unable to act, the remaining one is appointed to act solely, as replacement attorney.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></div><span style="font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">James’ advisers might have told him in the past that such an appointment in a Lasting Power was impossible or would risk being challenged by the Office of the Public Guardian (as indeed happened to Mrs Miles).<span style="mso-spacerun: yes;">&nbsp; </span>Clients like James may want to revisit their Lasting Powers now.<span style="mso-spacerun: yes;">&nbsp; </span></span></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-12458195145499086882016-11-03T08:10:00.000+00:002016-11-03T08:10:17.482+00:00Non-dom tax changes – IHT periodic charges and offshore trusts <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Well advised non-doms know that UK situated assets should never be directly held by their offshore discretionary trusts.<span style="mso-spacerun: yes;">&nbsp; </span>To do so would subject the offshore trust to periodic charges to UK Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>).<span style="mso-spacerun: yes;">&nbsp; </span>These charges comprise the entry charge, the ten year anniversary charge, and exit charges, where value leaves the trust after creation.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">To avoid these charges arising, it has been commonplace for UK situs assets, such as UK real estate, to be owned by an offshore company, which in turn is wholly owned by an offshore trust.<span style="mso-spacerun: yes;">&nbsp; </span>The trust’s asset is the shares in the offshore company – non-UK situs, so the trust is not subject to periodic IHT charges as it does not directly own UK situated assets.<span style="mso-spacerun: yes;">&nbsp; </span>As a result, many non-doms have no understanding of what periodic charges are and when they apply.<span style="mso-spacerun: yes;">&nbsp; </span>However, if the Government’s proposals in their August Further Consultation come to pass, ignorance of IHT periodic charges could cost non-doms and their offshore trusts.</span><a name='more'></a><br /> <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">With the proposed move towards transparency, for IHT purposes, of offshore structures owning UK real estate from April 2017, non-doms owning UK residential property where a trust is involved in the structure will suddenly find, in many cases for the first time, that the periodic charges to IHT will start to bite on their trust.<span style="mso-spacerun: yes;">&nbsp; </span>Advisers need to help their non-dom clients to prepare for this change and to consider whether any reorganisation of the trust structure needs to take place before April 2017, while the trust’s shares in offshore companies owning UK residential property remain ‘excluded property’ for IHT purposes.</span></div><br /><div style="margin: 6pt 0cm;"><a href="https://www.blogger.com/null" name="_CurrentPage"></a><span style="font-family: Arial;">If a ten year anniversary charge falls on or after 6 April 2017, the charge will take into account (among other things):</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 6pt; mso-add-space: auto; mso-list: l0 level1 lfo1;">the settlor’s history of chargeable transfers in the seven years prior to the trust commencing (note that anyone adding property to a trust could constitute a settlor for UK tax purposes);</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">the value of any property (other than excluded property, which has remained excluded property throughout) in a related settlement (i.e. a settlement created on the same day by the same settlor) on the day that the settlement was created; and</div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 6pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;">the value of transfers giving rise to an exit charge in the previous ten years.</div></li></ul><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Fortunately, due to a change in the law enacted in the Finance (No. 2) Act 2015, excluded property held in an offshore trust which has always been excluded property will no longer be taken into account when calculating the ten year anniversary charge due on relevant property.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The charge is, at most, 6%.<span style="mso-spacerun: yes;">&nbsp; </span>The rules of the calculation differ if the trust was created before March 1974 or there have been additions to the trust since its creation.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Trustees of trusts created in years ending -7 (after 6 April in that year) and -8 should continue to monitor developments carefully, as they will have to get to grips with the new regime and reporting requirements almost immediately. <span style="mso-spacerun: yes;">&nbsp;</span>Trying to gather the necessary information, some of which may be very historic, may prove to be time consuming.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">IHT periodic charges only apply to settlements for IHT purposes – offshore companies are not subject to periodic charges.<span style="mso-spacerun: yes;">&nbsp; </span>Ensuring that offshore trusts do not indirectly or directly hold UK residential property after 5 April 2017 will prevent periodic charges applying.<span style="mso-spacerun: yes;">&nbsp; </span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-53050130570321141322016-10-20T08:33:00.003+01:002016-10-20T08:33:38.930+01:00Charitable giving in Wills: charity must be governed by UK law to secure IHT exemption <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The UK Inheritance Tax (<b style="mso-bidi-font-weight: normal;">IHT</b>) saving is probably the last reason why anyone would deliberately choose to leave assets to charity in their Will.<span style="mso-spacerun: yes;">&nbsp; </span>However, it is the case that leaving assets to charity is very IHT efficient, for two key reasons.<span style="mso-spacerun: yes;">&nbsp; </span>Qualifying gifts are 100% IHT exempt – the charity will not have any IHT deducted from what is left to them.<span style="mso-spacerun: yes;">&nbsp; </span>In addition, from April 2012, the estate of anyone leaving at least 10% of their net estate to charity benefits from a reduced IHT rate of 36%.<span style="mso-spacerun: yes;">&nbsp; </span>The recent Court of Appeal case of <i style="mso-bidi-font-style: normal;">Routier &amp; Anor</i> v <i style="mso-bidi-font-style: normal;">HMRC</i> ([2016] EWCA Civ 938) is a reminder, though, that, where the Will contains a foreign element, it is dangerous to assume that the IHT charity exemption</span><a href="https://www.blogger.com/null" name="_CurrentPage"></a><span style="font-family: Arial;">will be automatic.</span><a name='more'></a><br /> <br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Although Beryl Coulter was domiciled in Jersey on her death, she had over £1,800,000 worth of her assets in the UK.<span style="mso-spacerun: yes;">&nbsp; </span>UK situated assets held by non-doms are subject to IHT.<span style="mso-spacerun: yes;">&nbsp; </span>Mrs Coulter left these assets, and others, to a trust in her Will whose purpose was to construct homes for elderly residents of a Jersey parish, or in default to Jersey Hospice Care.<span style="mso-spacerun: yes;">&nbsp; </span>The trust was governed by Jersey law.<span style="mso-spacerun: yes;">&nbsp; </span>The executors applied for IHT exemption on the basis that the funds were being held on a trust for charitable purposes only.</span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">The Court of Appeal upheld the lower court’s decision that the will trust was not entitled to any IHT exemption.<span style="mso-spacerun: yes;">&nbsp; </span>It was not in dispute that the will trust’s purposes were charitable as a matter of English law and that it did not matter that the purposes were to be carried out outside the UK.<span style="mso-spacerun: yes;">&nbsp; </span>However, the problem was that past case law had construed tax legislation to mean that, for an outright gift to charity to benefit from the IHT exemption, the charity had to be governed by some part of the UK and to be subject to the jurisdiction of the UK courts.<span style="mso-spacerun: yes;">&nbsp; </span>The novel point in this case was that the funds were left to a charitable trust, rather than to a named charity outright, so was the law different?<span style="mso-spacerun: yes;">&nbsp; </span>It was held that there should be no distinction.<span style="mso-spacerun: yes;">&nbsp; </span>The court was of the view that it would be ‘incongruous’ for a UK court to have to determine whether the purposes of a charity governed by a foreign law (and thus subject to a foreign court) were charitable purposes as a matter of UK law.<span style="mso-spacerun: yes;">&nbsp; </span>As the trust was governed by Jersey law, the IHT exemption was not available.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">Accordingly, if a Will creates a charitable trust, it must be governed by UK law as one of the preconditions to securing the IHT charity exemption.<span style="mso-spacerun: yes;">&nbsp; </span>It is worth noting that Mrs Coulter would have achieved this outcome if she had made a UK Will to deal with her UK assets and whose terms, including any trusts, were expressed to be governed by English law.<span style="mso-spacerun: yes;">&nbsp; </span>This case tends to support the general rule of thumb that non-doms should make UK Wills to deal with their UK situated assets. </span></div><br /><div style="margin: 6pt 0cm;"><span style="font-family: Arial;">However, the appeal is not over yet, as the court is to review whether the ruling breaches EU legislation requiring free movement of capital between Member States and third countries.<span style="mso-spacerun: yes;">&nbsp; </span><span style="mso-spacerun: yes;">&nbsp;&nbsp;</span><span style="mso-spacerun: yes;">&nbsp;&nbsp;</span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.comtag:blogger.com,1999:blog-4672873646009260020.post-14477739611523498602016-10-06T09:50:00.000+01:002016-10-06T09:50:06.149+01:00Long term UK resident non-doms set to lose remittance basis of taxation <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Anyone who does not regard England as their permanent home (non-dom) but who has been resident in the UK for at least 15 out of the past 20 income tax years will wake up to a very different UK tax regime on 6 April 2017, according to a further consultation issued by the Government on 19 August.<span style="mso-spacerun: yes;">&nbsp;</span></span><a name='more'></a> <br /> <br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Currently anyone claiming non-dom status but who is resident in the UK can choose not to be taxed to UK tax on their non-UK situated (i.e. foreign) income and gains in the tax year in which they arise, if those foreign income and gains can be kept outside of the UK or not used to enjoy a benefit in the UK.<span style="mso-spacerun: yes;">&nbsp; </span>This is the favourable remittance basis of taxation offered by the UK to all non-doms, although anyone resident in the UK for at least seven out of the previous nine income tax years has to pay the remittance basis charge in order to access the remittance basis.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Under current rules, access to the remittance basis can continue indefinitely for non-doms, as long as a non-dom does not acquire an actual UK domicile.<span style="mso-spacerun: yes;">&nbsp; </span>However, under the new rules proposed by the Government, once the 15/20 year rule applies to a non-dom, the remittance basis is no longer available.<span style="mso-spacerun: yes;">&nbsp; </span>To be precise, a non-dom will be deemed domiciled for all UK tax purposes – Income Tax (IT), Capital Gains Tax (CGT) and Inheritance Tax (IHT) once the 15/20 year rule is met.<span style="mso-spacerun: yes;">&nbsp; </span>This means that a non-dom will be subject to UK income tax and capital gains tax on their worldwide income and gains from directly held assets, on an arising basis – i.e. the year in which that income or those gains arise – starting from 6 April 2017.<span style="mso-spacerun: yes;">&nbsp; </span>Therefore many long term resident non-doms will find their UK tax bill increases in the next tax year, if they remain resident in the UK and do nothing.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Unfortunately none of the above and the planning ideas in the rest of this note apply to anyone born in the UK with a UK domicile of origin (broadly, to British parents), who has acquired a foreign domicile of choice whilst living abroad and has returned to the UK and taken up UK residency again. </span></div><br /><div style="margin: 0cm 0cm 10pt;"><b style="mso-bidi-font-weight: normal;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Transitional sweeteners - some light relief?</span></b></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Rebasing</span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">It would be harsh indeed if a long term resident non-dom chose to realise an asset after 6 April 2017 and found that gains relating to the pre 6 April 2017 period of his UK residency (which could be significant if the asset has been held for many years) were all taxable to CGT.<span style="mso-spacerun: yes;">&nbsp; </span>So the Government proposes to offer a rebasing election, to prevent pre-6 April 2017 gains from being taxable.<span style="mso-spacerun: yes;">&nbsp; </span>However, the conditions for qualification are several:</span></div><br /><ul style="direction: ltr; list-style-type: disc;"><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The asset must be in personal ownership – assets in a structure, such as a trust or company, are not re-based.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The asset must have been owned at 8 July 2015 (the date of the UK’s Summer Budget 2015, when these changes were initially proposed in outline).</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The non-dom must have paid the remittance basis charge for at least one UK tax year before April 2017.</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The non-dom must become deemed domiciled under the new rules as at 6 April 2017 (i.e. the 15/20 rule applies to them).</span></div></li><li style="color: black; font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal;"><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 0pt; margin-top: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo1;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">The non-dom must not have a UK domicile of origin.</span></div><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-add-space: auto;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span></div></li></ul><div style="color: black; font-family: &quot;Calibri&quot;,&quot;sans-serif&quot;; font-style: normal; font-weight: normal; margin-bottom: 10pt; margin-top: 0cm; mso-add-space: auto;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">So if a person is going to become deemed domiciled in a tax year after 2017/2018 under the new rules, this option is not open to them and they may wish to consider taking deliberate steps to bring about a re-basing by other means before 2017/2018, if they are likely to become deemed domiciled under the new rules in the short to medium term.<span style="mso-spacerun: yes;">&nbsp; </span>Some non-doms may wish to weigh up whether it is worth paying the remittance basis charge in 2015/2016 or 2016/2017 for the first time, if that will enable them to access the re-basing opportunity.</span></div><br /><div style="margin: 0cm 0cm 10pt;"><i style="mso-bidi-font-style: normal;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">Mixed fund amnesty</span></i></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">In addition, for all non-doms, not just those who will become deemed domiciled on 6 April 2017, the Government is offering a window of opportunity, in tax year 2017/2018, to reorganise foreign assets which have become ‘mixed funds’ during the period of ownership, meaning that the asset comprises a mixture of foreign income, gains and the initial capital.<span style="mso-spacerun: yes;">&nbsp; </span>For example, a portfolio of investments which was held before UK residency commenced, and thus would comprise ‘clean capital’ (capital capable of being remitted to the UK free of tax), could have had dividends and gains on realised investments ploughed back into the portfolio for reinvestment over the years.<span style="mso-spacerun: yes;">&nbsp; </span>The portfolio is a mixed fund as the income and gains have not been segregated from the initial capital.<span style="mso-spacerun: yes;">&nbsp; </span>Remitting a mixed fund to the UK is unattractive for UK tax purposes as the income element, which is taxed at the highest rates, is deemed to be remitted first in any given tax year.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><br /><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;">However, if the necessary records exist, the offshore mixed fund can be segregated into its constituent components of clean capital, foreign income and gains, while it remains offshore, by putting the different categories into separate accounts.<span style="mso-spacerun: yes;">&nbsp; </span>A non-dom can then choose to remit only funds from the clean capital account while UK resident, which will not trigger a UK tax charge.<span style="mso-spacerun: yes;">&nbsp; </span>In effect, this opportunity will enable those eligible to boost their levels of clean capital, perhaps sufficient to meet their living needs while their UK residency persists.<span style="mso-spacerun: yes;">&nbsp; </span>But one of the key qualifying conditions is that the asset must be in the form of a bank account, although assets not in the form of cash currently which are liquidated and segregated can still take advantage of this opportunity.<span style="mso-spacerun: yes;">&nbsp; </span>Only those with decent accounting records need apply but it is not clear from the consultation just how scrupulous the records will need to be in order to take advantage of this.<span style="mso-spacerun: yes;">&nbsp; </span>If this could be of interest, assessing the strength of those records is something that can be usefully done now.<span style="mso-spacerun: yes;">&nbsp; </span></span></div><div style="margin: 0cm 0cm 10pt;"><span style="font-family: &quot;Arial&quot;,&quot;sans-serif&quot;; line-height: 115%; mso-ansi-language: EN-GB;"><span style="mso-spacerun: yes;"><em><span style="font-size: x-small;">A fuller version of this article, including some planning points for offshore&nbsp;structures created by non-doms, can be found on Fladgate's website</span></em></span></span></div></div>Helena Luckhursthttp://www.blogger.com/profile/04949935681382175752noreply@blogger.com